Q+A: Michael Stiassny - NZ needs to wake up on CEO pay

NZ needs to “wake up” on CEO pay says IOD past president

The past president of the Institute of Directors, Michael Stiassny, admitted on TVNZ’s Q+A programme this morning that NZ hasn’t got the CEO remuneration right.

This comes off the back of Fonterra’s announcement this week that its CEO, Theo Spierings, has received a big bonus this year, bumping his salary package to $8.3 million.

“We haven’t got it right. I’m not proud of that. Luckily, we’re not in the Fonterra game, but we are paying our CEOs a lot of money. But compared with the person who works at the reception desk or something, it is significant. We need to take account of that, and we need to find a way of making that gap smaller.”

Mr Stiassny also said that NZ is paying CEOs based on what the world market dictates. “But I think we need to wake up and say, ‘Hey, New Zealand’s not a bad place to live. It is God’s own. People do want to come here.’ People do have a social responsibility, even CEOs,” he said.

And when asked why are we always shopping for that talent overseas? Mr Stiassny responded by saying “we have a lot of talent in New Zealand, but it’s always easier to look outside. And people look a lot more rounded, a lot rosier than when you know someone in a small village.”

Q + A
Episode 30
MICHAEL STIASSNY
Interviewed by Jessica Mutch

JESSICA In the flurry of post-election news, Fonterra revealed its CEO, Theo Spierings, has received a big bonus this year, bumping his salary package to $8.3 million. Winston Peters was quick to react, saying it showed there needed to be a say on pay law that would give shareholders more power in deciding CEOs’ salaries. We did ask Theo Spierings to appear this morning, but he is in Australia this weekend. Fonterra chair John Wilson was also unavailable. I’m joined now by Michael Stiassny, who has been on a number of corporate boards and is the past president of the Institute of Directors. Thank you very much for your time this morning.

MICHAEL Morena.

JESSICA I want to start off by asking you – $8.3 million. Fonterra’s profits went down 11%. Is that a fair package?

MICHAEL It seems to be exceedingly high when you look at shareholder return, but the details are about long-term, short-term and base salaries, so we can’t really comment on that other than we have to find a way that people in the market think that the salary is reasonable. The noise around it – it is not.

JESSICA Because Fonterra are saying, ‘Look, if you look at Australasia, if you look at the rest of the world, this very much fits in within that band of what a CEO can expect.’ Is that just what we have to pay for good people?

MICHAEL We have to find a way that the corporate world is looking as though it’s being fair, it’s listening to the majority of people, and 8.3 is a little bit high to get into that box.

JESSICA Just a little bit, a little bit.

MICHAEL A little bit.

JESSICA Because Otago University have done research saying that that gap between what the CEOs are earning and what the average worker is earning is widening. What do you think of that?

MICHAEL So, we look at Brexit, we look at Trump, we look at all these things that are happening in the world, and I think you would say that there is a frustration and a resentment that is growing between the bottom end of the market and the top end of the market. So people are saying, ‘You’ve got to do something here.’ And there is becoming a responsibility for corporates all round the world to take a leadership in these larger items, and it’s up to the boards of New Zealand companies to say, ‘We have to find a way of reducing the gap, making it seem—making, really, it fairer for all people who are working there.’

JESSICA Is that about paying workers more or bringing down that CEO package?

MICHAEL It’s about allowing our people to understand why CEOs are being paid what they are, by linking it to what we are all seeing happen in the world. So, total shareholder return is quite a good way of measuring performance, but there are other things. There’s culture. There’s sustainability around both the environment and the workers’ pay. And so it’s about doing a lot more things and selling that and communicating that to the market and to the people who are involved in the company.

JESSICA Is that what it’s about? Is it about making workers feel like they’re getting a good go rather than actually getting a pay rise?

MICHAEL No. Let’s be totally frank. If it wasn’t for house prices going up for those of us who own them, the amount of money that we have all gathered compared with the very top end of the market has become very different. So therefore, there has to be a realisation that the average worker and the difference between that and the CEO is significant. It’s more than it used to be.

JESSICA You chair a number of boards. How do you work out the CEO remuneration? Is it quite fractious when you’re doing that?

MICHAEL We haven’t got it right. I’m not proud of that. Luckily, we’re not in the Fonterra game, but we are paying our CEOs a lot of money. But compared with the person who works at the reception desk or something, it is significant. We need to take account of that, and we need to find a way of making that gap smaller.

JESSICA Why is that gap widening, do you think?

MICHAEL So, we look for CEOs on the world market. We say that we must pay them by that. But I think we need to wake up and say, ‘Hey, New Zealand’s not a bad place to live. It is God’s own. People do want to come here.’ People do have a social responsibility, even CEOs. And they say, ‘I can’t take that much more income compared with the worker in the factory. It’s just not right.’ So we’re asking everyone to lift their social conscience and actually start thinking about society as a whole and letting it grow in a good way.

JESSICA Why are we always shopping for that talent overseas? Do we not have it here in New Zealand?

MICHAEL We have a lot of talent in New Zealand, but it’s always easier to look outside. And people look a lot more rounded, a lot rosier than when you know someone in a small village. You say ‘well, I remember when they did this’ or ‘she did that’, but when you see someone who comes from Australia, their CV looks wonderful. Their references look great. We don’t know what they did 365 days a year. We don’t quite know what school they went to, what degree they’ve got. So it’s a completely… It’s a little bit closed, and we seem to see them far rosier than we do our own people.

JESSICA Is that something you personally are focusing on? Trying to attract New Zealand CEOs?

MICHAEL No, we’re trying to— Well, at Vector, for instance, we have a major problem attracting workers, because people don’t want to live in Auckland at the moment because it’s too hard. So, we’re struggling with getting linesmen – unfortunately, a very sexist term, but linesmen – to work in Auckland when they can go to Timaru or Hawke’s Bay. They can go to Tauranga. Schooling’s good. They get a nice house. It’s a great place to be, and they can go and do things after work. So it’s a big issue for us, and it’s really important; we need those people to stay in Auckland.

JESSICA Winston Peters has come out and said that shareholders need to have more of a say on what CEOs earn, and if they’re not comfortable about it, they should be able to get that reviewed. What do you think of that idea?

MICHAEL I think shareholders have a right to express their views by appointing boards, and we’ve kind of missed that as well. They need to use their vote on boards appropriately. So, the boards are there. They’re responsible. They should make the boards accountable to explain what’s going on, in a way that makes them happy or unhappy, and then use their vote appropriately. So I don’t see them having a vote at the table, so to speak, like in England or Australia.

JESSICA We’ll have to leave it there. Thank you very much for your time this morning. Appreciate it. Thanks.

MICHAEL Pleasure.

The link to the interview.

Q+A, 9-10am Sundays on TVNZ 1 and one hour later on TVNZ 1 + 1.
Repeated Sunday evening at around 11:35pm. Streamed live at www.tvnz.co.nz
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