Survey: NZ CEO base pay rising, incentives shrinking

NEWS RELEASE

Monday 20 August 2012

Survey: NZ CEO base pay rising, incentives shrinking

“Boards thinking about increasing fees should be careful in the current environment”

Two surveys published today by leading strategic remuneration consultancy Strategic Pay paint a picture of rising executive base pay and shrinking incentives in New Zealand at a time of unprecedented scrutiny of closer links between executive pay and performance.

The largest and most thorough surveys on their sectors in New Zealand – created by the amalgamation of Strategic Pay Limited and Moyle Consulting’s reports for the first time – show that although base salaries for CEOs and Chairperson fees are on the rise, and in some cases significantly, Non-Executive Directors’ fees have shrunk over the past year.

Strategic Pay’s ‘CEO and Top Executives Survey’ report highlighted that:

• Median annual base salaries for CEOs/Managing Directors have risen 9.87% ($28,311) to $315,000 (2011: $286,689), although median Total Remuneration rose by 2.3% to $338,500 (2011: $330,725).

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• Average variable pay (incentives and bonuses) paid to CEO/MDs over the past 12 months has shrunk by 58% ($91,893) to $65,664 or 12% of average Base Salary (2011: $157,557 or 44%).

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• CEOs/MDs of large New Zealand organisations - with revenues between $240m and $1 billion - saw median packages rise 3.6% at base salary and 2.7% for total remuneration. These movements represent same incumbents in the 2011 and 2012 surveys. The whole sample data for 2012 shows median Total Remuneration packages of $535,000.

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• CEO/MDs of New Zealand’s smaller organisations - with revenues less than $15m - earned median total remuneration packages of $245,000 (up 5.6% on 2011: $231,952) and an average of $279,172 (up 8.2% on 2011: $258,011). The upper quartile Total Remuneration package is $375,782 (2011: $309,775).

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• The gap between Private Sector CEO/MD base salaries and those of their Public Sector peers has shrunk over the past 12 months. Private Sector CEO/MDs earned a median of about 0.5% more Base Salary than in the Public Sector ($316,427 versus $315,000). In 2011, Private Sector CEO/MDs earned 8% more, or $300,000 versus $277,306.

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The New Zealand Directors’ Fees Survey report highlighted that:

• The gap between fees to company Chairs and Non-Executive Directors is growing:

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- The median base annual fee for a Non-Executive Chair was $65,000, up 3.8% from $62,606 in 2011

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- Median base annual fees paid to Non-Executive Directors were $33,600, down 4% from $35,000 in 2011, reversing an average median increase over the past three years of 4.3%.

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• Highest fees were paid to non-executive chairs within the manufacturing industry, consistent with last year. They were nearly four times the lowest fees, to chairs within the education industry.

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• Chairs of publicly listed companies are paid a median 36% more than those of unlisted Private Sector organisations. This difference is up from 28% last year.

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John McGill, Strategic Pay’s Managing Director, says that increasing transparency on executive pay and boardroom fee levels is a legacy of the Global Financial Crisis.

“New Zealanders - like the Australian, American and UK public – want to see closer links between pay and performance, particularly given the tough economic conditions. Boards must continue to be mindful of public sensitivities and investor concerns.”

“We are in a period where a combination of low overall economic growth, global dissatisfaction with some examples of executive largesse in North America and Europe and continual shortage of talent at both CEO, Senior Executive and Boardroom level, leads to a situation where our local circumstances are causing Boards to be very careful concerning any proposed increases.

“Reflecting the importance of a Board Chair in terms of overall accountability, there has in recent years been a higher movement in the fee levels for this role.

“Whilst Boards thinking about increasing fees may well move cautiously this year, people should bear in mind that New Zealand practice in setting executive remuneration is strong by world standards, especially as the Companies Act provides that shareholders must be given reasonable opportunity to discuss the management of a company at a shareholders’ meeting.”

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