INTOUCH : More CEOs Have ‘at risk’ Salary Component

Base salaries for the country’s CEOs kept ahead of inflation last year with median increase of five percent. And, in line with international practice, performance pay became an increasingly common part of the total package with the incidence rising from 56 to 65 percent, according to the annual Sheffield CEO Survey.
“It’s positive indicator that New Zealand organisations are aligning with international norms, though there’s still long way to go,” said Sheffield reward manager Jarrod Moyle.
New Zealand continues to lag behind Australia and other countries in the developed world in its use of performance-based pay. ‘global CEO’ on average has nearly 39 percent of pay at risk, compared with 16 percent for New Zealand CEO.
“That has to be an issue, given our nation’s comparatively low level of productivity. Linking pay more closely to longer-term performance objectives has great potential to contribute to solving this productivity problem,” Moyle said.
Alongside package data, CEOs were asked about their performance in 2007 – revealing decline in those fully achieving their financial targets, while the proportion of those not achieving targets increased. Nevertheless, the underachievers still received three quarters of their targeted performance pay. “This is of real concern. It could signal that the performance-pay system is not robust and underperforming CEOs are still being paid bonuses,” Moyle said.
Other findings show that public sector CEO base salaries grew by around 5.7 percent compared with 4.6 percent for the private sector. The median total package in the public sector is now $285,000, compared with $258,000 for the private sector.
Moyle said the relative strength of public sector remuneration was reasonable. “The typical public sector organisation is now two to three times bigger than the typical private sector organisation on all the normal determinants of CEO remuneration – employee numbers, revenue, and asset value.”
Not surprising, Auckland continues to reward its top executives the most, followed by Wellington and Christ­church. Total packages for an Auckland CEO continued their upward trend of the past two years, reaching $324,000 in 2007 (up from $298,000 the previous year). Wellington CEOs’ total packages reached $305,000, up from $285,000 in 2006, while Christchurch CEOs showed median of $240,000.
Sheffield’s CEO survey includes data from 501 CEOs, managing directors and general managers in variety of organisations and industry sectors throughout New Zealand. M