Bill English slams NZ Super Fund for chief executive's 36 per cent pay increase
Board members who approved a 36 per cent pay increase for New Zealand's highest-paid public servant against official advice could lose their positions as a result, Prime Minister Bill English has warned.
Documents obtained under the Official Information Act show NZ Super Fund chief executive Adrian Orr received the pay rise last year, despite both English and the State Services Commission objecting.
The increase came on the back of a 22 per cent salary hike only two years earlier, with Orr's annual pay packet now over $1 million.
Speaking to media at his weekly press conference, English said the decision was "a matter that will be taken into account when it comes to reappointment of board members".
"The Government has a view, the board's taken a different view - I think any board who takes a different view when it's 100 per cent subsidiary takes risks about tenure."
While Orr and the Super Fund had "performed very well by world standards", their decision to ignore the advice would need to be taken into account.
"The discussion we've had about the pay is no reflection on the performance of the fund or actually the professional and managerial competence of the board, but they're public entities and the Government has a view about remuneration increases."
English said he would prefer a more stable process for setting salaries, such as setting a level for annual increases at the start of an appointment.
"There would be the opportunity to try and get a longer-term view than an annual haggle with a board who are rightly saying their chief executives are very competent, but a bit overenthusiastic about what they should be paid."
In an October 2015 letter to the SSC explaining plans for the pay increase in the 2015/16 financial year, the then-Guardians of NZ Superannuation board chairman Gavin Walker said it had considered the recommended public sector pay scale, but didn't believe it was appropriate for setting Orr's salary.
"The highly specialist nature of the role and the organisation...and our anticipated recruitment challenges in replacing the incumbent's skill set require a directly meaningful and relevant, market-based benchmark."
The Super Fund's "sustained strong performance", with an annual rate of return of 9.67 per cent, also had to be considered, while part of the 35.6 per cent increase would be withheld as performance-related bonuses for the board to pay at its discretion, Walker said.
In a response, the State Services Commissioner's office said it could not support the size of the increase.
While there had been a 9.4 per cent increase in the size of Orr's job, he had already received pay increases of 25 per cent over the two previous years, including a 22 per cent increase in 2013 against the advice of the SSC and English.
The Government's "ongoing expectation of restraint in the current fiscal climate" meant a six per cent increase was more appropriate, the SSC said.
English - in his previous role as finance minister - was more restrained still, telling current Guardians chairwoman Catherine Savage a 35.6 per cent increase was "too large in the current economic climate" and a 2.5 per cent increase was the right amount.
However, a report from the SSC in July 2016 confirmed Orr had received the increase as originally proposed.
English made his objections clear, writing in pen at the bottom of the report: "If asked I will publicly state I opposed the increase. Need to discuss with the Board Chair."
SALARY 'OUT OF STEP'
On Monday, State Services Commissioner Peter Hughes reaffirmed the SSC's opposition to the increase, saying it was "significantly out of step with the rest of the state sector and difficult to justify in a public organisation".
Hughes said the SSC planned to reveal in future whether a board had followed its advice or "chosen to act independently" when setting salaries.
Savage defended Orr's salary, saying it was "fair, competitive and appropriate given the nature and complexity of the role".
The 35.6 per cent increase related to Orr's potential rather than actual salary, with 60 per cent of his remuneration package "at risk" in the form of performance-based bonuses which he had never received in full.
Orr made $1.03m in the 2015/16 financial year, with a base salary of $690,322 and a bonus of $334,799 - an actual increase of 23.4 per cent.
SALARY 'LOWER THAN INTERNATIONAL PEERS'
Savage said the board relied on external market data when setting Orr's salary, while his pay was "not high compared to international peers".
His large pay rises in recent years reflected "a degree of catching up", after he received no increase between October 2010 and July 2013.
The board would look at Orr's pay increases "with fresh eyes" each year, but was unmoved on its opinion that market salaries were more relevant than other public sector chief executives.
"We are [at odds], and it's because of the uniqueness of the role ... we'll always be transparent and disclose what that pay is."
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