Praise for reining in executive pay
Executive fat cats face having their waistlines trimmed by a gang of corporate dietitians.
Investment fund managers fed up with the endless "upward spiral" of executive pay plan to band together to force companies to reduce salaries to more justifiable levels.
Average wages have grown by 47 per cent since 2003, but at board level it was up by a whopping 146 per cent, Devon Funds Management principal Paul Glass told an industry briefing on responsible investing yesterday.
"You can see the fat cats are absolutely face-down in the trough," he said.
He dismissed the argument that directors and top management were being compensated for the value they added to their companies.
"If you look at the underlying performance of those companies, not a hell of a lot has changed," he said. "We're also seeing, in my view, entrepreneurial pay for managerial behaviour."
The issue was "massively problematic". He described how companies carefully ticked all the boxes by hiring remuneration consultants to benchmark them against supposedly similar firms.
But invariably they never recommended pay cuts. "It's not circular - it's actually an upward spiral that we face."
Mr Glass was reluctant to point fingers, but said a big Australian bank boss could earn more than $15 million in a good year for managing "a fairly cosy oligopoly".
He hoped to band together with other institutions early next year to put a framework in place for pegging executive pay to sensible levels.
He has the backing of Anne-Maree O'Connor, head of responsible investment at the New Zealand Superannuation Fund, which manages about $23 billion.
She emphasised the importance of individual funds pulling their weight to improve corporate governance.
"We are, after all, minority shareholders - we do need to work together to create change."
Another ally could well be the Christian KiwiSaver scheme Koinonia, whose policy document says executive pay is one of the criteria it uses for assessing investment in companies.
"The trustees view executive pay seriously as it has, in recent years, become an ugly face of capitalism," the document says.
Mr Glass would also like to adopt Australia's "two strikes" rule, under which the entire board of a company is broken up if 25 per cent of shareholders disagree with the remuneration report for two consecutive annual meetings.
The Financial Markets Authority's head of strategic intelligence, Adam Hunt, told the conference he had taken the suggestion on board.
"Do please share some ideas for how we can improve this area, because I think New Zealand needs to grow up."
PAY AT THE TOP
ANZ chief executive David Hisco: $3.5m – 34 times the average ANZ employee
BNZ chief executive Andrew Thorburn: $3.13m – 36 times the average BNZ employee
Fonterra chief executive Theo Spierings: $3m – 31 times the average Fonterra employee
Fletcher Building chief executive Jonathan Ling: $2.44m – 31 times the average Fletcher employee
Sky Television chief executive John Fellet: $1.6m – 21 times the average Sky employee