CEO pay increases at five times average rate

Fonterra chief executive Theo Spierings is New Zealand's top paid CEO. Photo: NZ Herald
Fonterra chief executive Theo Spierings is New Zealand's top paid CEO. Photo: NZ Herald
A University of Otago study shows CEO pay is increasing at almost five times the rate of the average worker.

Otago University Business School Accountancy and Finance researcher Dr Helen Roberts’ longitudinal study study, which adjusted for inflation, showed the proportion of CEOs paid over $500,000 per year had also increased approximately five-fold across three different compensation measures.

It showed chief executives were now paid 30 to 50 times more than the average wage of $60,000.

Almost half of New Zealand chief executives now earned at least $500,000 as the cash component of their compensation package in 2013, compared to only 10% of CEOs in 1997.

However, cash only represented some of the picture and total compensation and real wealth had more than doubled since the research began, with considerable change recorded in the last decade.

In real terms, mean total CEO compensation was up 114% in 17 years, while mean real worker income is up 26%, confirming there is a widening gap between the CEO’s income and that of their workers.

The ever-widening pay ratio is an international trend - the CEO pay ratio in the United States for instance is typically between 300 and 500, but in some cases exceeds 1000 times that of the average wage.

The highest paid executive of a listed New Zealand company this year is Fonterra CEO Theo Spierings, who received an $8.32 million salary package.

Mr Spierings’ 2017 base salary was $2.463m, plus benefits of $170,036, short-term incentive pay of $1.832m and long-term incentive pay of $3.855m, which worked out to an annual increase of 78.5%.

Dr Roberts  also tracked the economic performance of the CEO’s company alongside remuneration, to give an objective overview of the link between CEO performance bonuses and company’s annual results.

“This clearly demonstrates an overall trend of marked growth over time which is not on the same trajectory as the economic ups and downs of publicly listed companies in New Zealand, nor worker salaries.”

Income fluctuated from one year to the next, but while some downturns, like the Global Financial Crisis, for example, dampened the increases, they still rose. 

Comments

Oh. That's torn it. Upward trajectory does not support 'ups and downs' theory.

Dr Roberts doesn't understand that the demand for, and the value of, competent CEOs has been increasing, in recent times, at a high rate. It is foolish to expect the value and remuneration of all jobs to stay constant over the years. Times change: for example, night-cart men and milk home delivery people don't have jobs today - and so now they only get paid the unemployment benefit or else choose another job. Dr Roberts may be envious that her position as a university academic is valued less than a competent company CEO. The reputation of university academics would be enhanced if they did more teaching and less politics.

 

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