New Zealand agencies rapped for CEO pay hikes

By on 17/12/2017 | Updated on 24/09/2020
Peter Hughes, Head of State Services, State Services Commission, New Zealand

Three quangos have been rapped by New Zealand’s public sector pay commissioner for giving their chief executives bigger salary hikes than he advised.

The Guardians of NZ Superannuation, the Accident Compensation Corporation (ACC), and Telarc Ltd were named in the Senior Pay Report on state sector chief executives for the 2016-17 financial year, which was published on Wednesday.

The report, which for the first time identifies Crown entity boards that refused to follow the commissioner’s advice, comes as the coalition government of Jacinda Ardern examines options for restraining salary increases for public sector leaders, including pay caps.

Pay boosts

Adrian Orr, chief executive of the NZ Super Fund, which manages state pensions, received a 15% rise that brought his annual remuneration to more than NZ$1million  (US$701,290).

Orr’s pay rose from the band of NZ$950,000-NZ$959,999 to between $1,090,000 and NZ$1,099,999, including an element relating to a job resizing decision made in a previous year, according to the report.

Philip Cryer, head of Telarc Ltd, the country’s certification and registration agency,  was awarded a 19% pay rise that took his salary from NZ$210-220,000 to NZ$250-259,000.

And Scott Pickering, the Accident Compensation Corporation’s chief executive, was given a 2.5% per cent pay rise that took his salary from NZ$810-820,000 to NZ$830-$839,000.

Unsustainable increases

State services commissioner Peter Hughes warned that the pay decisions taken by the three Crown entity boards against his advice could “inform minister’s decisions about the tenure of board members”.

“The upward trajectory of chief executive salaries in the state sector, in particular some Crown entities, is not sustainable and it’s time for change,” he said. “I expect public accountability and transparency around the remuneration for public sector chief executives and that includes Crown entities.”

Hughes said that despite their autonomy, arm’s-length agencies were a part of the public services; they operate with public money for the public good, and their executives should reasonably expect to earn less than their counterparts in a private sector company.

Pay policy reforms

“While the Board has the right to make these decisions, I do not believe increases of the magnitude given are warranted or justifiable in a public agency, especially where the increase follows previous increases over and above my advice,” Hughes said.

“The minister has asked me for advice on regulatory options and potential amendments to the Crown Entities Act to provide tighter controls over remuneration increases for Crown entity chief executives.”

Hughes said the commission was developing a new remuneration policy that would recognise and reward motivations other than remuneration and will be more closely aligned to the delivery of high-quality services for New Zealanders.

As reported by the New Zealand Herald, State services minister Chris Hipkins said: “The growth of chief executive pay across the whole of the state sector has gotten out of hand. It’s time to put a lid on it, whether that is a cap or some other mechanism – but it’s certainly time to stop the rampant growth at the senior chief executive level.”

The offices of the Accident Compensation Corporation (ACC), one of 3 Crown entities giving their chief executives bigger salary hikes against New Zealand’s public sector pay commissioner’s advice (Image courtesy: William Stadtwald Demchick).

Pay hike no accident

ACC board chair Dame Paula Rebstock said in a statement that the State Services Commission had supported an increase in the chief executive’s remuneration of 1%, as reported by Radio New Zealand.

“The ACC Board considered this advice as well as market movement of more than 4%,” she said. “Because of this – and the Chief Executive’s strong performance – the Board approved an increase of 2.8%.

“Under the chief executive, ACC has significantly reduced levies to Kiwis, privacy breaches have dropped dramatically, financial performance remains strong, public trust and confidence has been at record levels, more funding is going into injury prevention; and, significantly, the scheme has achieved full funding.”

In 2016-17, the average base salary for public service chief executives was 5.5 times that of their employees – a tiny drop of 0.3 percentage points on the 2013 ratio, according to the report. The average pay increase in 2016-17 was 2% for ministry and department chiefs and 4.1% for Crown entity heads, compared to 2.3% for public service staff.

About Liz Heron

Liz Heron is a journalist based in London. She worked on daily newspapers for more than 16 years as an education correspondent, section editor and general news reporter. She was Education Editor of the South China Morning Post in Hong Kong and has contributed to a wide range of British media including The Independent, The Guardian and the BBC.

One Comment

  1. Margaret Murray-Benge says:

    I think the pay hikes are ridiculous, as it is not tricliking down and they are not held to account enough.
    I do not believe that in all my years of experience that such high payments does not match higher performance.

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