Christchurch City Council got it right. They recently gave a wage rise of $68,000 to their chief executive.
This caused howls of public outrage from the citizens of Christchurch. I can't understand why.
I believe the criticism is unjustified. There is no doubt in my mind he has earned it. He is reported as saying he hasn't worked so hard in any job as in the past 12 months. That must surely be an understatement. He would never in his working life have encountered a year like 2011.
And that perhaps is where the confusion comes in. He is an employee of the city council and not an elected representative of his community. His employer would have taken the time to evaluate his performance over the past chaotic 12 months and probably brought in an executive remuneration consultant to assist them.
The CEO has played a pivotal role as adviser to the mayor and councillors. He would have been on call 24/7.
The council valued his sustained and effective work performance and commitment to the job and rewarded him accordingly. They made the right decision. He now has a wealth of experience and that will doubtless inform and assist all other councils in New Zealand in the event of a major catastrophe.
He should definitely a speaker at every Local Government Zone meeting this year and at its AGM.
In recent years the salaries of senior executives have often been commented on, mostly unfavourably. For the majority of us what we earn is our own business and we don't have our salary discussed and scrutinised by the public.
This happens when tax- or ratepayer's money is involved. You do get listed companies that include the details of their CEO and senior executive's salaries in their annual report. This satisfies the shareholders, is acceptable and rarely raises an eyebrow. But the remuneration of a CEO in a central government agency or a local authority such as a regional or city council will often give rise to comment.
When it's public money we want to know how much is being spent on the top salaries and that the CEO's in particular is justified. Whether we know what the job actually entails or not is sometimes seen as irrelevant!
If they earn many thousands of dollars then we have a right to hold them to account and question their performance. We are putting up the dosh after all. But the working life of a CEO today is no walk in the park. Their annual KPIs (key performance indicators) are monitored routinely by the board, council, owner of the business or State Services Commission; if you're employed by a government department.
For the majority of CEOs, in all three sectors; public, private and not for profit, bonuses are also now firmly entrenched. I have never had much time for them believing you should negotiate a suitable salary package and then deliver on what is required.
When you achieve your KPIs or come pretty close to it, why is a bonus required? You did your job. Admittedly your bonus will be adjusted when the KPIs are not met in their entirety, but even so the addition of a bonus, as an incentive to actually perform to the required level, has never sat well with me.
All the senior managers I have spoken to never receive their full bonus. It isn't that KPIs aren't met either. I believe although organisations have an annual total bonus figure in mind for senior managers, they calculate they can probably retain about 20 per cent. These bonuses are not insignificant either so you have to be prepared to go head to head with your boss or chairman to make your case for the full amount.
A CEO's performance appraisal can often throw up some interesting findings too about the governance body such as having to report to an entrenched board with the inability to adapt to changing times; the board having difficulty making timely decisions and in some cases the composition of the board - not sufficiently skilled in the industry/sector to grasp what's going on. A board or council's performance definitely has a bearing on the CEO ability to perform well in her job.
Recent overseas studies have shown that more and more organisations and companies are bringing in former CEOs as board members. They bring required high level strategic thinking to the position. They put probing questions to the CEO and senior staff, and more importantly know when the answers don't stack up.