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NZ In Danger Of Losing More Top Talent To Aus.

NEWS RELEASE

19TH MARCH 2003

New Zealand In Danger Of Losing More Top Talent To Australia

Highlights from Sheffield's 2003 CEO survey

- Trans-Tasman pay gap widens
- NZ CEOs not being paid to perform
- Auckland topples Wellington for best CEO packages

New Zealand CEOs are receiving fixed remuneration packages which are 46% less than their Australian counterparts, according to Sheffield's 2003 CEO survey, which shows the top level pay gap across the Tasman is widening.

"In 2000, Australian chief executives of organisations with revenues of less than NZ$200m received a fixed package which was 40% greater than their New Zealand counterparts. It increased to 43% in 2001, and this latest survey puts the gap at 46%," says Sheffield managing director Ian Taylor.

The survey is the most comprehensive survey of CEO reward in New Zealand, including data from 511 managing directors, chief executives and general managers of both New Zealand and Australian organisations over a three year period.

"This pay difference is cause for real concern, especially as New Zealand directly competes for chief executive talent with Australia. The lure of the New Zealand lifestyle is not enough on its own to retain top managerial talent. New Zealand chief executives are still amongst the poorest paid of the peers in the OECD," says Mr Taylor.

Steve Richardson, Sheffield's Head of Reward & Technology consulting adds, "The incidence of performance-based pay in New Zealand chief executive packages is also low by international standards, although it has been steadily increasing since the early 1990s."

"North American CEOs often receive up to 60% of their total package in performance-related pay. Admittedly, they're usually in charge of much bigger organisations, but if you compare it with New Zealand, only 16% of our CEOs' packages are comprised of performance pay."

Mr Richardson says this results in many chief executives with very poor records for enhancing shareholder wealth being paid as much as those who run similar-sized businesses where significant shareholder wealth has been created.

"This certainly doesn't present much of an incentive for our chief executives to perform," he says.

"To compete internationally and to drive organisational performance in New Zealand we need to become more sophisticated and competitive in how we reward our chief executives in the future. We need to compete more closely with Australia, and increase the proportion of pay at risk linked to organisational performance to increase shareholder wealth, drive our public sector and move the economy forward more aggressively."

The survey also shows overall bonuses and incentive payments received by NZ CEOs in 2002 are down on the previous year.

"The backdrop of a slower global economy, and difficult trading conditions suggests a stronger link between organisational performance and chief executive reward. However these performance payments ranged between 7% and 18%, with a median of only 12% of the total package, and typically represent a very small part of a chief executive pay in New Zealand," says Mr Richardson.

Other highlights from the survey included:

- Overall the level of total remuneration received by this year's sample of New Zealand chief executives ranged from $162,813 to $314,058 with a median of approximately $215,000. The median increase in base salary during 2002 for chief executives was 4.8% (compared to 4.6% last year), which was ahead of the CPI (2.7%) for the year ending December 2002. This compares to median increases in base salary for senior management, and middle management & salaried staff of 3.5% and 3.0% respectively for the same period.

- Auckland has ousted Wellington in the most highly paid CEOs stakes. Previous years' results have indicated that Wellington chief executives were typically likely to receive the highest level of total remuneration. However, this year's results have shifted in favour of Auckland-based chief executives, possibly a reflection of the increase seen in the last few years in the number of corporate head offices transferring from Wellington to Auckland. If we assume that the median total package of a CEO based in Auckland represents 100%, then a CEO's package in Wellington would be 97.9%, with Christchurch CEOs at 88.1%.

ENDS

Sources:

1. Sheffield 2003 CEO Survey

2. Sheffield 2003 Salary Review Survey

3. Towers Perrin Worldwide Total Remuneration Study 2001/2002

ABOUT SHEFFIELD

Sheffield Limited, one of the leading consultancy organisations in the Asia-Pacific region, is an innovative New Zealand-owned and internationally-focussed partnership with more than 90 staff in offices in Auckland, Wellington, Christchurch and Sydney. It partners with clients to improve business performance at every level of the organisation by deploying the right people, developing committed cultures, delivering successful change and driving superior performance.


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