Editorial: Keep the lid on

21:12, Oct 30 2012

Hefty salary increases for some state-sector chief executives was reported to have engendered feelings of outrage in some quarters.

That's not surprising.

Consider the job (and pay rise) of Foreign Affairs and Trade Ministry chief executive John Allen. He has headed controversial restructuring that cut dozens of jobs, slashed entitlements for some diplomats and closed embassies.

His pay has risen $40,000 to the $620,000 - $629,999 salary band.

Labour foreign affairs spokesman Phil Goff denounced this as a blatant double standard. A government that was sacking hundreds of staff and cutting their incomes, he argued, should be leading by example and restraining salary increases at the top.

But the widening income gulf between bosses and their workers is even more pronounced in the private sector.


Waikato University history student Ryan Wood has suggested a maximum wage.

His argument: if the top salary was legally fixed at, say, $200,000 a year, the "economic miracle-workers running companies" would be encouraged to start their own businesses where, as shareholders, "they can indulge in the dividends they deserve".

The creation of new companies would lead to more jobs, negating the need for this thing called the "starting-out" wage.

It's been done before, in a capitalist country. President Franklin D Roosevelt issued an executive order during World War II limiting corporate salaries to US$25,000.

A much less rigid constraint might be considered.

An Australian business writer traced the growing mismatch between executive remuneration and performance to the mandatory disclosure of salaries introduced in the early 1990s. Suddenly every executive could see from annual reports what every other executive was earning, spawning a new industry of "remuneration consultants" and triggering a burgeoning of salaries that is still out of control two decades later.

Stop publishing the figures, and the pace of executive pay rises should be tempered. But then we would have nothing to be outraged about.

No-one begrudges chief executives being well paid for good performance. Few of us would willingly be in their position, working the long hours, making and delivering the tough decision.

At the same time, greater control is needed to keep salaries in perspective.

The Marlborough Express