Editorial: Public service bosses can't expect sky-high salaries

Adrian Orr, CEO NZ Super Fund.
Maarten Holl

Adrian Orr, CEO NZ Super Fund.

OPINION: Prime Minister Bill English would be right to sack members of the board of the Super Fund. Their decision to give the fund's CEO a massive pay increase was a direct challenge to the Government. No state-owned company can defy its owner and expect to get away with it.

Professional directors say their colleagues on the Super Fund board faced a dilemma. The board believed Adrian Orr deserved a massive 36 per cent increase in his potential pay package.The then board chairman Gavin Walker said it didn't believe the public sector pay scale was the right one for setting Orr's salary. So it went ahead and paid him the higher sum.

This won't do. The board is a creature of the state. Board members serve at the pleasure of the Government. If they won't obey the Government's wishes they should resign. If they don't resign, they should be sacked.

Walker's deeper argument is also flawed. The idea that the board must "match the market" - that is, pay an exorbitant salary - in order to get a competent CEO is false.

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Those who work for the state cannot expect to get huge private sector-style salaries. This is not just a statement about the brute realities of public finance. It's not just that the government cannot afford to match the extremely high salaries that the lords of commerce might get.

The point is that there are other rewards than the purely financial. Some people with advanced money management skills recognise that "to be of service to the state" is an honourable calling. Some people with these skills recognise that their public job has a mana greater than that of people who simply want to make a profit for their company.

Adrian Orr is the guardian of the people's pension savings. That is a position of great importance and great prestige. Orr presumably takes a special pride in having that extraordinarily important job. An equally skilful person, who could take an equal pride in the work, will eventually replace him.

Such people do exist, thank goodness.

Walker points to the  strong performance of the fund under Orr, and worries that the board won't be able to replace him with a suitable candidate unless the salary gets a big boost. It's notable that Walker didn't say Orr had threatened to quit unless he got such an increase.

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Presumably Walker would have done so if Orr had threatened this. A threatened resignation from an able performer would have been an important argument in the battle with the politicians.

Orr is a long-serving boss at the fund and in 2013 got a 22 per cent salary increase after it was judged there had been an increase in the size of his job. That should have been compensation enough. In any event he is already the most highly-paid person on the public payroll.

Orr's salary may not be "high compared with international peers," as current board chairwoman  Catherine Savage says. His recent pay rises had reflected "a degree of catching up", she argues.

But this is to assume that catching up with the private sector is the single and indisputable goal.

In fact, it can't and shouldn't be.

 - Stuff

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