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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