I’m not anti-employer, or anti-CEO. I know the importance of good and competent management and the difference that makes – I don’t mind such people being paid well. I’ve just spent two days with some very capable leaders and management in Air NZ and I’m thankful they’re there looking out for my national airline, along with the 10,000 Air NZ employees who help make the difference.
But wage gaps between workers and chief executives have grown so large that some staff would have to work up to 124 years to earn the same as their boss’s annual salary, according to today’s Dominion Post.
This isn’t news. I blogged on the headlines on the same theme in Australia in September last year, about the time we’d all been talking about the huge salary of the Telecom CEO, Paul Reynolds while at the same time hundreds of Teleco engineers were made redundant with no redundancy compensation.
Some said on that blog that I am envious. I’m not. But I struggle with the fairness of the salary gap being so huge between the people who lead our companies and those who actually do the work. I don’t think it contributes anything to reducing the growing inequalities in New Zealand and I’m not sure it adds anything to improving our society.
I don’t know what the answer is, or even if there is an answer – you might have some ideas.
But it feels wrong that one person can be paid so much – or why they even need that much money – when so many other New Zealanders are struggling to make a basic living.
Here’s what the bosses get
Westpac George Frazis $5.59m
Telecom Paul Reynolds $5.15m
Fonterra Andrew Ferrier $5.11m
The Warehouse Ian Morrice $2.84m
Fletcher Building Jonathan Ling $2.71m
Air New Zealand Rob Fyfe $2.58m
SkyCity Nigel Morrison $2.55m
Contact Energy David Baldwin $1.34m
Restaurant Brands NZ Russel Creedy $580,000 to $590,000
Salaries include performance-based bonuses and share options. Source: Unions, Federated Farmers
If, say, a Westpac CEO was not paid 5.5m but 1.5m per year,, where would the $4m difference go? Presumably to profit and dividends to shareholders, who in turn pay tax on their dividend, so in effect, it would be a redistribution, which is more along the lines of what people here seem to be saying?
Hi tracey,
2700 tellers on $30K p.a. could be given a 5% pay increase. That would be a nice little wealth redistribution.
However the CEO’s pay is in a way a little bit of a distraction as well IMO. Its worth examining how much capital these banks are sucking out of our economy in fees and interest that you and I pay.
In the year to Sept 30, 2010 Westpac made $6.4M profit PER WEEK off the back of NZ workers and businesses, and shipped that money back to Australian shareholders.
Put another way, their CEO’s pay is not even equal to one week of profit that Westpac made in the last year.
Agreed, the money going offshore is a bigger issue than the Salary per se. Well spotted
C.V. from my limited knowledge, many medical specialists provide their trade to both public and private. And I do not begrudge their incomes. asy a oncologist I think they deserve whatthey get, as a consequennce of their skill they can cure, moderate or pro long a patients life. And if no + effect at least comfort the patient and their family. I used the real estate agent as you said they have profited from a hot market. Yet there are other sales arts (not a profession) that also earn huge commissions. Should a sales person be paid as much or more than the top dog with greater responsibility and accountability (perhaps!!)?
!!!
I have no problem with a top CEO earning a few mill, as long as there is a social element to the job. If it is just ship the call centre to India to save millions, or manufacture in China instead of in NZ then no.
as an example of a unjustified bonus The Warehouse CEO had in his bonus system a calc based on the share price. Thru no skill of his Foodstuffs and Progressive decided to buy 10% each as a blocking takeover from the other. Share price rocketed and Ian Morris pocketed a handy sum. cannot find the link but it was around 2006. On the -ve side this link also shows that a “Performance” bonus is paid when results go down, pity this was not a company wide policy
http://www.nzshareholders.co.nz/newsletters/2005-12.htm
Hi Herod., I guess I helped describe my position by saying that the Restaurant Brands CEO was probably very fairly paid at around $600K p.a. (yes a medical specialist with a successful private practice might make that much as well).
Your comfort level is that remuneration in the few millions of dollars per year might be appropriate in some cases. To me a pay package that big unnecessarily magnifies the gap between the haves and the have nots and pushes a level of societal inequality and materialism which I think is unhelpful. It really creates the two NZ’s that Goff talks about.
Rewarding people for the good work they do in society is not merely about $$$ IMO but should also be about recognition, respect,and many other factors. When mega$$$ are seen to equal recognition and respect then the plot is getting lost somewhere. Because then those with no $$$ might be seen not to deserve any recognition and any respect.
I also think to myself that a CEO who is being paid $1.4M p.a. (roughly 50x the median income, which is probably at the upper bound of what I think is reasonable for those in really top flight roles) is someone who is going to be able to afford every luxury in life.
That’s the ability to buy two brand new Porsche 911′s year after year, and to own freehold a new 4 bedroom house in Mt Eden year after year, and to still pay for luxurious living on a day to day basis.
From about that point onwards, I have to question what does more more more do for society (or even for that earner)?
Apart from the difference in the magnitude of the pay I certainly do appreciate the points you make.
(I have a comment in mod)
To clarify I think that an income limit of ~50x the median income for any person (CEO or any other worker or professional) is reasonable. This is not a pay limit which I think should affect CEO’s only, but *everyone and anyone*.
So why don’t people live within their means and just get on with it. I do. My job pays a little above the minimum wage. I live with the constraints of that and I am very happy. Hopefully in the future I will have a better paying job and be able to do more. But you won’t find me posting on a blog complaining about the well off who have done a lot more in life. Those salaries are relatively uncommon because the people who get paid them have to be very very good at what they do and the businesses they run are very large. Also a lot of people are poor because they made bad choices in life, like partnering with losers and having children when they couldn’t afford it.
I think when it comes to income we need to stop worrying about everyone else and concentrate on our life and how we can improve it. Winging and moaning will do nothing for you. I’d hate to see NZ have a salary cap – its borderline communism and were better than that.
Dude did you really buy into the meme that these people get paid more than you because they are worth every dollar?
Is someone who is on $28/hr twice as good at you? Is someone on $56/hr four times as good at you?
How about someone on $600/hr? Are they forty times as good as you? Get some morale lad!
What a disgusting vindictive sentiment.
How about this: A lot of people are poor because their jobs have been offshored by the rich, and our skilled manufacturing/blue collar industries have been decimated and replaced by low wage retail, service sector and cafe jobs.
Further, NZ graduates who are trying to find $20-30/hour jobs in this country are struggling and are leaving NZ by the planeload as economic migrants to other countries.
I blogged on this subject a while back – it isn’t just the CEO’s that get big money – look at what the directors get!!
http://iansescapevalve.blogspot.com/2010/10/how-do-you-become-ceo-of-telecom.html
Why not pay MP’s a base salary set at 3 * the average wage and 6 * the minimum wage?
It’s around $145,000 at the moment so would allow an increase to $150,000 at the next increase (the average wage is $50,000 and the minimum wage is half that at $25,000).
Of course this would be a small increase (about 3%) and would barely cover the loss of some of their allowances. However MP’s with ambition for higher remuneration should note that they get around only 10% less than Australian MP’s who operate in a much higher paid society than the average New Zealand workers/business leader.
PS If the dole was half the minimum wage and this was half the average wage and the MP’s salary was 3 * the average wage – then the MP would receive 12 * the level of someone on the dole. Generally those on the dole do less damage to the economy and social fabric of the nation.
I’m in the wrong industry!
What Darien’s opinion on cutting the salaries of CEOs that earn over $500,000 a year that Parliament can actually control..?
Such as those running SOEs and Ministries..?
Let me guess they earn it cause they work for the government..?
I’m interested in how you selected the $500K figure, Jeremy.
IMO any change regarding a salary cap has got to be across the board.
BTW I do not think that Parliament sets the salaries of heads of SOE’s and Ministeries.
Randomly… Half a million – nice ring, $10,000 a week…
They don’t but they easily can as they own or fund such organisations…
Hmmmmm methinks you don’t know what communism is. There are some aspects to communal decision making and communal/co-operative enterprise which are a pretty damn fine idea, and which could be incorporated into a modern democracy.
The neat thing is that many small Silicon Valley high tech startups with just the first few founding partners getting the work done, each having a say in how decisions are made (down to and including the dress code), each having an ownership stake: that is perfectly entrepreneurial – and also perfectly communist.
And sometimes very financially rewarding.
“There are some aspects to communal decision making and communal/co-operative enterprise which are a pretty damn fine idea, and which could be incorporated into a modern democracy.”
Communist apologist. More people worldwide died under communism than under fascism (heck, under Stalin and Mao alone) and fascism was really, really horrible. Morally there’s nothing worth listening to there, and we should ignore everything they have to say as a matter of principal. Do you see people advocating the policies that helped Hitler get Germany out of the recession? At least Mussolini kept the trains running on time, eh?
You’re the kind of person who would have thought we in the West should have been nice to the Soviet Union, instead of what we did which was cripple their economy with containment, scare them into blowing all their money on weapons, and then sitting back at watching it fall from afar.
Pretty sickening really, unusual since Labour voters are supposed to be the ones with a social conscience. Of course, because you’re advocating adopting some communist ideologies because they might work economically you get a free pass, but if John Key came out tomorrow and said “we’re going to follow some of the ideas of the Third Reich, because some quasi-fascist ideas make a fine inclusion to modern democracy” you would be up in arms and out on the street.
We on the right love CV Callum becuase at least he is honest with us about his immoral nonense, the absolute classic was when he said:
Tbh I have a little giggle to myself everytime a Labour member complains about salary gaps. Lets face each MP even if there right at the back like Aaron Gilmore or David Shearer (no disrespect intended to either, just examples) earn at least $100k.
Compared to the average salary of a Labour voter who, lets be honest, is probably below the average. So you guys are complaining about high level execs earning heaps while you guys are effectively the same ie earning lots while your voters earn a somewaht miniscule amount in comparison. And apart from re the expenses, I don’t recall a Labour member fighting for a decreased salary.
Hypocritical much.
As I explained above, there are many beneficial aspects to community or communally owned and controlled enterprises. Many small high tech Silicon Valley startups began this way, with a small handful of original partners who each had an ownership stake and equal say in what happened in the business.
Now you may deliberately conflate authoritarian Leninism, the disasters of old Soviet or Chinese rule etc and call it one and the same as true communism, social democracy or democratic socialism, but of course it is not the same in the slightest.
Yeah mate and I will repeat it here:
Its not your money. When you go to work and earn an income don’t make the mistake of thinking that you are doing that for yourself either, you are doing it on behalf of your communities and your country.
The idea is simple Jeremy and I know that you get it: some of our effort and income earnt everyday must go towards the common good. Societies cannot work on pure self interest alone, because at times societal interest and self interest will not be perfectly aligned, issues such as externalities must be properly managed and dealt with.
Ummmmm, so how does an MP who works as many hours a week as a CEO end up only earning 1/20th of what a CEO does? Why aren’t YOU pushing for higher pay for MP’s? How hypocritical. Much.
More seriously, income inequality is a growing problem in NZ. NZ’s median income of ~$26K p.a. is pathetic and needs to be pushed upwards significantly.
Mark has a point in that Labour MP’s could set an example by calling for MP’s pay restraint – by linking the pay of MP’s to the average wage.
After all, is not the ultimate incentive for an MP to improve our economic performance and ensure a share of that goes to workers is to link their own reward/pay to success in this.
The current base salary is $145,000 (before bonuses) – so limiting future increases to the a level no more than the 3 * the average wage (which is currently $50,000) is appropriate.
If the NACT government oppose this, then it shows it is only Labour that is on the side of a fair deal for improving the lot of the average worker.
Jeremy, the issue is in the definition of left and right, which is a flawed way of looking at things (http://iansescapevalve.blogspot.com/2010/10/nanny-state.html look at the diagrams)
What is quite bizarre is that a group whose culture is based on collectivism and communitarianism (e.g. the Maori Party) would become partners with libertarians and individualists (ACT and National).
As a Socialist I believe the investment should be collective, namely, that investment in the country should be for the greater good – better infrastructure, better education, better social policy (contrast the example of the best performing schools in the OECD in terms of national standards and student support – different from national’s view of education – http://www.guardian.co.uk/world/2010/dec/05/finland-schools-curriculum-teaching) – there is an interesting parallel about salaries in this piece too.
OK, so Hitler’s race based policies were not what I would advocate, but he did sort their economy out very rapidly. Having gross inequity is not the sign of a good society (but then again Thatcher said there is no such thing as society)