The NZ million-dollar agribusiness earners
The reasoning behind salaries and directors’ fees for New Zealand’s largest agribusiness companies is a complex one. Gerard Hutching writes.
The $8.32 million Fonterra chief executive Theo Spierings took home this year has thrown a spotlight on salaries and directors’ fees of New Zealand’s largest agribusiness companies.
The primary sector drives the New Zealand economy, earning
$38 billion or more than 70 per cent of exports, and a number of the biggest companies are competing in cut-throat international markets. Senior lecturer in accountancy at Otago University, Dr Helen Roberts, says the way in which pay for chief executives and directors is determined is always problematic. ‘‘Part of the process involves a compensation consultant, who is also not an independent third party.’’
The consultant uses market data to determine median pay levels for industries and uses this information to then recommend base remuneration levels. ’’The consultant gets well paid for their service so of course it is in their best interest to maintain a longterm relationship with the firm and the CEO. Consultants never recommend decreases in pay,’’ Roberts says.
The Institute of Directors says this year director fees had a ‘‘moderate’’ increase to $44,000, up
2.3 per cent from $42,994 last year. The median chairman fee increased from $54,000 to $55,000. The institute does not collect information on the breakdown of additional payments such as fees and other benefits.
Pay for female directors has improved over the past two years. In 2015 the pay difference between male and female directors was 21.6 per cent, but by this year the gap had closed to 9.9 per cent. An institute spokeswoman said director remuneration was not straightforward.
‘‘Many factors including risk, complexity, the industry, asset value, turnover and staff numbers all need to be taken into account when setting an appropriate salary for a director. If we want to attract and maintain great talent on boards it is important that the reward matches the risk undertaken and the skills brought to the table.’’
At this time of year companies are reporting their financial results. The following are some of the highlights. What annual reports do not always show are what chief executives receive as ‘‘extras’’ over their base salary, such as short-term incentives, long-term incentives, superannuation, and shares awarded.
Dairy Companies Fonterra New Zealand’s largest company has 22,000 employees and sales revenue of $19.2b to produce a profit of $745m. About 20 executives earn more than $1m. Roberts said companies needed to be clearer about the terminology they used when referring to bonuses. In Fonterra’s case, Spierings’ bonuses were derived from its ‘‘velocity programme’’ but that term meant little to the man in the street. Chairman John Wilson is the highest paid director in the country, receiving $405,000 to attend 23 meetings and guide the co-operative.
Synlait Part Chinese-owned Synlait is small with about 200 farmers supplying it with milk but in less than a decade since it built its first processing plant the company has carved out lucrative niche markets. Chief executive and managing director John Penno received a $925,000 base salary plus $274,000 bonus last year, while chairman Graeme Milne earned $115,000. Revenue was $759m, for a profit of $38.2m.
Westland Milk Products The small co-op plays a vital role on the West Coast where it is the largest employer and has a turnover of
$629m. Former chief executive Rod Quin earned the ire of shareholders in his final year in
2016 when he was given a farewell
$1.06m total, comprising a salary of
$770,000 and a bonus of $290,000 this on a loss of $10m.
Although Westland has reported its latest earnings, it has not yet revealed how much replacement Toni Brendish earned in her first year. Retired chairman Matt O’Regan was paid $125,000.
Tatua Like Synlait, Tatua is pocket-sized but profitable. The Waikato co-op paid its outgoing chief executive Paul McGilvary
$1.23m in 2016, and chairman Stephen Allen $110,000. Revenue was $335m, and earnings $114m. Meat Processors
Silver Fern Farms SFF is part owned by Chinese company Shanghai Maling. Outgoing chief executive Dean Hamilton earns a salary of $1.5m, while chairman Rob Hewett gets $184,000.
Alliance Group The largest sheepmeat processing co-op in New Zealand made a $10.1m profit on turnover of $1.3b. Chief executive David Surveyor is on
$1m and chairman Murray Taggart $160,0000.
Tegel The largest chicken processor in the country listed on the NZX last year and reported a profit of $34m on turnover of
$614m. Chief executive Phil Hand received $768,096 this year, modest by comparison to the previous year when he was paid a bonus ‘‘in recognition of his past service’’ to Tegel of $2.4m.
Horticulture
Zespri Zespri truly operates in the global marketplace, with none of its fruit sold within New Zealand. Chief executive for the last nine years, Lain Jager, earned
$1.23m last year before retiring, while Peter McBride made $196,000 as chairman. Revenue for the semi-co-op was $2.2b.
Comvita Comvita describes itself as a health products manufacturer although most of its revenue comes from manuka honey. The sharemarket darling of recent years has slightly lost its gloss after a disastrous honey harvest last year. Chief executive Scott Coulter was paid $490,000, and chairman Neil Craig $117,000. Fertiliser companies Ballance Agri-Nutrients Ballance is a co-operative, as is Ravensdown. Last year it earned revenue of $805m, on which it made a profit $56.8m. Chief executive Mark Wynne is on
$1.25m, and chairman David Peacocke $136,000.
Ravensdown Christchurchbased Ravensdown had revenue of
$627m for a $41m profit, with chief executive Greg Campbell paid
$1.14m and chairman John Henderson $178,000.
PGG Wrightson The agricultural services company is half owned by Chinese company Agria. Its chief executive Alan Lai is also chairman of PGG Wrightson. He was paid $210,000 and chief executive Mark Dewney
$1.64m. Its revenue was $1.13b, and profit $46.3m.
Industry-good agencies Beef & Lamb NZ Beef & Lamb NZ advocates on behalf of sheep and beef farmers. It has total income of $33m, of which $27m comes from a levy on farmers. Chief executive Sam McIvor is paid $290,000 and chairman James Parsons $68,000.
DairyNZ DairyNZ has income of $89m, much of it derived from a farmer levy. Chief executive Tim Mackle earns $590,000, and chairman Michael Spaans $76,000.
Horticulture NZ A levy-based organisation, HortNZ’s total revenue is $8.3m. Its chairman Julian Raine earned $77,000 but the salary of chief executive Mike Chapman is not disclosed.
Landcorp Landcorp manages about 140 farms, of which 85 are owned by the Crown. Last year its turnover was $233m, on which it made a net profit of $51.9m. Chief executive Steven Carden is paid
$540,000 and chairwoman Traci Houpapa $95,000.
Ministry for Primary Industries MPI has more than
2200 staff and has responsibility for overseeing biosecurity, food safety, trade, agriculture, forestry and fisheries. Chief executive Martyn Dunne’s salary is $530,000, the ninth highest of government departments.
❚ In annual reports most companies do not specify chief executive pay, therefore the highest paid person is assumed to be the chief executive.
In 2015 the pay difference between male and female directors was 21.6 per cent, but by this year the gap had closed to 9.9 per cent.