CEO pay up – but only just

News release from Moyle Remuneration Consulting

CEO pay up – but only just

Chief executive pay rose a modest 1.5% in 2010, less than the 3% rise in general salaries, according to new data from Moyle Remuneration Consulting. Moyle’s latest CEO Remuneration Survey finds the median base-salary increase of 1.5% is better than the previous year (0%) but still well below historical levels, which have been in the 5-6% range.

In Moyle’s Salary Review Survey, released in February, general staff salaries rose a median 3%. “CEOs have felt the impact of the recession more than salaried staff these past couple of years,” says director Jarrod Moyle. “This ‘wage-freeze’ culture at the top level has been the case for many employers, while they wait for economic conditions to stabilise.” He believes it will be some time before bigger percentage increases will occur, as there is still uncertainty about when the recovery will come, and a continuing focus on managing costs.

The median base salary was $200,000, and with benefits and bonuses included, the median total cost of employing a CEO was $305,000. This represents no change on the previous year.

Only 51% of CEOs in the survey received a base salary increase, which is similar to the percentage in the previous year (48%), but considerably down on a historical basis. Generally at least 70% of CEOs are accustomed to an annual increase.

Mr Moyle does not believe the situation is sustainable without some change in recruitment and retention policies. Given the typical Australian CEO earns twice as much as his or her New Zealand counterpart, the talent drain across the Tasman is a real concern, he says. “The survey demonstrates that New Zealand CEO remuneration is not over the top. Increases have been relatively modest. While there are always those for whom criticism is justified, in our experience there are relatively few examples of this in New Zealand.”

The Moyle survey draws on data from the public sector, private enterprise and not for profits. It continues to demonstrate that at the median, CEOs in the public sector are likely to receive the highest base salary. The gap between median base salaries between the public and private sector is $72,385. Public-sector organisations in the survey tend to be much larger than private-sector respondents, which contributes to the differential, says Mr Moyle.

Organisation size is just one consideration when it comes to setting chief executive pay, Mr Moyle notes. “Organisation size is a start point when setting executive pay, but we do also have to factor in ownership, industry, responsibility and complexity. Determining appropriate CEO pay is not easy and requires an analysis of many factors.”

The incidence of performance pay – at 56% - is a significant increase on the 43% reported in last year’s survey who received some form of performance payment. In addition, 81% of those eligible for a bonus or incentive hit their targets this year, and received a payment. This was up slightly from 79% last year but still well below historical norms of about 90%.

New Zealand organisations continue to focus on short-term (annual) performance-pay schemes. These are mostly bonuses and incentives, and in some instances profit share. The median bonus reported by the survey was around $36,000. Longer-term schemes are rare, says Mr Moyle.

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