An obscene 12 percent pay jump for already overpaid CEOs last year reveals a wilful ignorance from much of corporate New Zealand to the on-going harm inequality is causing the very society they live in, said Peter Malcolm, spokesperson for the income equality project Closing the Gap.

In its annual survey of top CEO pay issued last week, The New Zealand Herald showed the average earnings of already overpaid CEO’s jumped 12 percent last year to $1,750,141 compared with a 2.4 percent rise for average New Zealanders. The top CEO pay-packet went to Fletcher Building’s Ross Taylor, who took home a whopping $5.3 million.

“Are these men — and the top six earners were all men — really worth that much more than the average worker? According to justice, fairness and actual performance studies, absolutely not,” Mr. Malcolm said.

“The mismatch between worker and CEO pay contributes hugely to the large and growing levels of inequality in New Zealand and around the world,” he said. “And there is no up-side to inequality: it’s 100 percent harmful across the board, in health, education and well-being.”

What’s more, none of the arguments for these bloated pay packets stand up to scrutiny. As several researchers, including the University of Auckland’s Tim Hazeldine, have pointed out, this trend “lacks any obvious empirical justification in terms of general improvements in marketing, productivity, and profitability.”

What is the answer? More pressure on corporates to rein in excessive pay; government support for worker cooperatives; regulations linking CEO pay to that of the lowest-paid worker; and a much more steeply progressive tax system that takes a bigger bite out of any earnings over, say, $200,000 a year.

“We can and must turn this around,” Mr. Malcolm said, “and in an election year we need to keep up the pressure on the government, on corporates, on the CEOs themselves to do the right thing.”

References:

“NZ’s top bosses earned massive pay rises last year.” NZ Herald, 31 Jan 2020: https://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=12303178

“The Tip of the Iceberg: What underpins to pay.” Tim Hazeldine. University of Auckland Business Review, vol 19, No. 2, 2016.

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