Difference between a right and doing what’s right
Prime Minister Christopher Luxon’s flip-flop on whether he will continue to claim a $52,000 accommodation allowance for living in the Wellington apartment he owns is important.
Parliament has enacted a safety net of minimum employment entitlements, such as a minimum wage and entitlements to paid leave such as annual leave, sick leave and parental leave. For good reasons, the power of setting the pay of key public office-holders is given to an independent body, the Remuneration Authority, which sets an annual salary for our prime minister, ministers, MPs and certain other roles.
Luxon plays on his background in big business – former chief executive roles, mergers and acquisitions, and so on. He is used to negotiating his own salary and terms and conditions of employment. While there is no doubt the role of prime minister is a difficult job, it comes with a salary of $471,000 plus allowances and benefits. Luxon took a big pay cut when he opted out of the private sector.
One of the most popular moves the Ardern-led Government made was to freeze the pay of politicians in 2018. The pay freeze is due to end this year, and a new review by the Remuneration Authority may mean MPs get a huge increase to make up for six years of standing still. The outcome of the review may be contentious, as the cost of living crisis continues.
Chief executive roles are essentially about providing leadership and strategic direction to an organisation. Leadership is often expected to model behaviours that an organisation strives for. High-profile companies and their leaders often face scrutiny by the public and shareholders.
Luxon’s successor at Air New Zealand, Greg Foran, offered to reduce his base pay of $1.65 million by about 15% ($250,000) early in the Covid pandemic as he led his team through the huge changes, including redundancies, necessary at the time.
Last year, Air New Zealand’s competitor Qantas, experienced shockwaves when it was accused of allegedly selling tickets for flights that had already been cancelled over a three-month period in 2022. Late last year, it’s chief executive at the time, Alan Joyce, brought forward his retirement but he is still reported to have been paid over $20m for his final year.
Fletcher Building chief executive Ross Taylor recently announced he was stepping down as he advised the company had made a net loss of $120m in the first half of the financial year and downgraded its earnings guidance for the full year. Board chairperson Bruce Hassall also resigned.
In the United States, Tesla was taken to task by a shareholder in Delaware, where the company is incorporated. In January, the judge decided to void the pay package Tesla’s board gave founder Elon Musk by ordering it to cancel stock options worth US$50 billion (NZ$82b) awarded to him as chief executive.
In January, Stats NZ advised that the Consumers Price Index rose 4.7% in the 12 months to the December quarter and that the cost of living for the average household increased 7% in that period. Yet the new Government, which sets the employment safety net, recently said the minimum wage would rise by only 2% from April 1.
The housing allowance available to MPs is to assist those based outside of Wellington to find accommodation in the capital. Few prime ministers have claimed it, with Luxon being the first in at least 34 years. He told journalists: “I’m entitled to the entitlements that everyone else has.”
Luxon has now said that he will not claim the allowance and will repay the allowance he has already been paid. Under the law, we should all know our rights. That is different from doing what is right.