CEO pay: Who took a Covid cut?
CEO salaries: Who took a Covid cut, and who got a pay rise anyway
Some of the country’s big earners still collected handsome pay packets despite wage subsidies and falling profits. John Anthony reports.
The chief executives of many New Zealand companies could have afforded to go without pay this year as the country navigated the Covid-19 pandemic, one expert says, but instead some actually took home more pay this year than last.
A Sunday Star-Times analysis of New Zealand stock exchange-listed companies’ financial results found the country’s high-earners continued to take home big pay packets in 2020.
Some whose firms received a wage subsidy still got more in remuneration, despite, in some cases, a fall in profit.
University of Otago business school’s Dr Helen Roberts, who tracks chief executive pay, said executive compensation had been compounding over the past 30 years.
While some chief executives took pay cuts during the year, their salary was still considerably more than the average worker’s, she said.
‘‘The gap between what the CEO is earning and what the worker is earning is just continuing to increase over time,’’ Roberts said.
In 2019 the mean chief executive pay for the cash-only part of remuneration was $1.12 million, she said.
Despite some high-profile pay cuts, Roberts believed salary reductions could have gone much further in 2020.
She said some could have opted for zero compensation for the year, given the high level of compensation chief executives were paid in prior years.
‘‘These are very well-paid individuals, so they’ve got accumulated wealth, they have assets, they have everything they could possibly need.’’
While disclosure of chief executive compensation was more transparent than it had been in the past, it was still ‘‘very opaque’’ and inconsistent in the way it was reported across the market, she said.
‘‘For a non-expert reader it’s almost impossible to understand what’s going on.
‘‘The disclosure’s complex, it’s usually hidden somewhere in the middle of the report.
‘‘Even finding the remuneration details can take five or 10 minutes.’’
She said it was the directors’ role to assess whether chief executives were meeting their objectives, which could result in a conflict of interest if a chief executive sat on the board.
She said she had been keeping an eye on which chief executives had taken a cash pay reduction but at the same time received other benefits, such as rights issues or short or long-term incentives.
Roberts said lower-paid employees, not just senior leadership, should be offered profit-sharing incentives.
‘‘Why should it just be exclusively an executive compensation option?’’
Nearly 800,000 businesses claimed $14 billion in wage subsidies, and about $500m has been paid back in more than 16,600 refunds.
To access the first round of the wage subsidy, companies had to have experienced a 30 per cent revenue drop over a month between January and June compared with the same month in 2019, and that decline had to be related to Covid-19.
Wine producer Foley Wines claimed $624,175 in wage subsidies, with revenue down 40 per cent in May 2020 compared to May 2019. Its adjusted net profit for the year to June was $5.4m, up 54 per cent on the prior year.
Chief executive Mark Turnbull’s salary of $500,000 was unchanged on the previous year, but after bonuses were paid his total remuneration for the year jumped to $1.125m.
The $625,000 ‘‘discretionary bonus’’ was for performance and achievement of long-term strategic goals for the previous two financial years of $300,000 and $325,000 for the year to June.
The company did not respond to a request for comment.
Auckland and Wellington real estate company Precinct Properties, developer of Commercial Bay, received $700,000 in wage subsidies.
Precinct Properties chief executive Scott Pritchard’s total remuneration increased by about $7000, from $1.78m in the year to June 2019 to $1.85m in the year to June 2020.
It posted a $30.2m profit, down from $190.2m the previous year.
The company did not respond to a request for comment.
Former Sanford chief executive Volker Kuntzsch, who retired in September, was paid $2.12m in the year to September, more than twice as much as the $932,500 he received the previous year.
Sanford claimed $285,384 in wage subsidies. Its unaudited net profit was $22.4m, down 46 per cent on the previous year to September 30.
Kuntzsch’s salary consisted of his base salary to the date of his departure, a short-term incentive payment of $132,375 relating to the previous financial year, annual leave accrued but not used, and a further payment in connection with his resignation.
Sanford’s acting chief executive Andre Gargiulo said the difference in what Kuntzsch was paid between 2019 and 2020 was not a pay rise.
Pay rises at Sanford this year were limited and focused on those who were paid at, or close to minimum wage, he said.
Steel & Tube received $6.6m in wage subsidies. Chief executive Mark Malpass’ salary increased by nearly $3000, to $702,880 in the year to June. His pay is 12 times that of the median employee at $58,000.
The steel products manufacturer posted a $60m loss in the year to June, down on the $10.4m profit it made the prior year.
In August, it proposed up to 200 redundancies as it anticipated a Covid-19-led downturn.
The company did not respond to a request for comment.
Carpet-maker Cavalier claimed $2.8m in wage subsidies while its chief executive, Paul Alston, earned $526,669 in the year to June, an increase of $400 on the $526,267 the prior year.
The Cavalier board is also in the process of finalising a share-based long-term incentive scheme for its senior management team.
The company reported a $21.5m loss for the year to June 2020, a worse result than its $16.8m loss the previous year.
A spokeswoman said Alston didn’t receive a pay rise in 2020. The difference in remuneration from last year was due to a change in health insurance premiums, she said.
The Sunday Star-Times analysis excluded companies where the chief executive has not served two full financial years, and companies with a full year reporting date of December 31.
Also excluded were companies with a March 31 reporting date because, while the wage subsidy had been initiated by then, the economic impact of Covid-19 was not reflected in those balance sheets and chief executive pay was unlikely to have been affected.
Economist John McGill, who leads remuneration consulting company Strategic Pay, said a range of factors went into determining chief executive pay but there would need to be good reason behind a chief executive getting a pay rise in what had been a challenging year for most companies.
‘‘If you’re showing big increases this year and you’re a listed company you’d better have a good reason,’’ McGill said.
Companies in this position would need to be clear about when wage subsidies were received, how the business was affected by Covid-19 and whether they ran down cash reserves or gave pay increases to senior executives.
McGill said March was a highly uncertain time for companies, and the full extent of Covid-19’s economic damage may not become apparent until next year.
‘‘No one really knew who were going to be the winners and losers.’’
McGill said the normal round of senior executive pay increases had been ‘‘neglected’’ this year.
‘‘There has been a lot of pay restraint.’’ He expected pay increases to be relatively low in the coming year with fixed remuneration increases in the range of 1-4 per cent.
Boards and remuneration committees would be resetting their performance parameters and incentive schemes as companies looked to a recovery, he said.
‘‘It’s time to show a greater level of sensitivity around what you are paying and why you’re paying that.’’
Pressures around senior executive pay remained, such as attracting the right candidate and ensuring salaries were competitive.
Chief executives that did take a pay cut sent a positive message to lower-paid staff, he said.
‘‘It is generally seen as a good single signal that they are putting themselves in the same position as their colleagues.’’
Chief executives of some of the largest companies to receive the wage subsidy took big pay cuts during the year, but still ended up earning large remuneration packages.
One of the companies worst hit by Covid-19 was Air New Zealand, which reduced in size by a third, let go of more than 4000 staff and posted its first loss in 18 years. It claimed $127m in wage subsidies.
Chief executive Greg Foran, who started in February, was paid a salary and benefits of $618,000 for the year to June.
The company’s annual report said, as part of the response to Covid-19, Foran’s annual contracted salary decreased from $1.65m to $1.4m from March 16 until December 31.
Air New Zealand chief people officer Joe McCollum said Foran’s total compensation for 2020 would be around 40 per cent of his target remuneration.
In November, Foran was issued 1,369,077 rights convertible to shares. At Air New Zealand’s current share price of around $1.70, the rights are worth $2.3m.
The rights will be paid in 2023 if the company
meets certain performance targets.
The airline’s decision to issue performance bonuses was described as ‘‘tone-deaf’’ by staff, a union said at the time.
Fletcher Building, which reported a $190m loss for the year to June, claimed $67.8m in wage subsidies.
Chief executive Ross Taylor’s remuneration was reduced by 30 per cent for six months to $1.97m, with no short-term incentive payment for performance. However, he was granted a long-term incentive in shares valued at $2m.
NZX-listed Downer received $41m in wage subsidies and $28m for its cleaning business Spotless.
In response to Covid-19, senior leaders reduced their fixed remuneration by 50 per cent from the beginning of March to the end of June.
Its New Zealand chief executive, Steve Killeen, received A$1.28m (NZ$1.37m) in remuneration, down from the A$1.54m he earned the prior year.
Casino operator SkyCity claimed $33m in wage subsidies and went on to post a normalised profit after tax of $66m for the year to June, down 60 per cent on the previous year.
The company’s recently retired chief executive, Graeme Stephens, earned $2.5m in total remuneration in 2020, down from the $3.92m he earned in 2019.
The Warehouse Group chief executive Nick Grayston received a significant pay rise for the year to August, with his remuneration increasing by $890,000 to $2.9m.
The company paid back its $67.7m wage subsidy this week, one of many NZX-listed companies to do so recently, after faring better than expected during the pandemic.
Given the impact of Covid-19 on Auckland International Airport’s business, chief executive Adrian Littlewood received no short-term incentive performance payment in the 2020 financial year.
His base salary for the year dropped $40,000 to $1.24m, taking his total remuneration for the 2020 year to $1,783,882 compared to $2,400,135 the prior year.
The airport’s profit after tax for the year to June was $193.9m, a decrease of 63 per cent on the prior year’s profit of $523.5m.
The airport claimed $6.5m in wage subsidies and reduced the majority of employee pay to 80 per cent to the end of June.
Stuff received a $6.2m wage subsidy.
‘‘It’s time to show a greater level of sensitivity around what you are paying and why you’re paying that.’’ Economist John McGill