Winning Lotto every payday: How to spend $8m salary?
Every year we find out the dizzyingly high salaries of the top executives and ruminate on how they could possibly be worth that kind of money.
The top 10 chief executive salaries were recently published and the highest earner was Ebos chief executive John Cullity, who earned $8.4 million in the last financial year.
Broken down into a conventional work week of 40 hours, 48 weeks of the year, this works out to around $4375 an hour.
If you divide by 26 fortnightly pay cycles a year, Cullity was getting $323,076 (gross) every payday. That’s about the equivalent of a $1m lottery win split three ways.
It’s important to note that a large component of most executive remuneration was bonuses paid on top of a base salary and there was also a significant chunk paid in tax.
Executive remuneration consultant Una Diver of Ernst and Young (EY) said a chief executive’s pay was usually directly tied to the size of the company and its short term and long term performance.
Ebos describes itself as “the largest and most diversified Australasian marketer, wholesaler and distributor of healthcare, medical and pharmaceutical products” with over 5000 employees across Australia, New Zealand, and Southeast Asia.
The company generated $6.6 billion in revenue in the first half of 2024 financial year.
Diver said performance bonuses were often included in executive salary packages for meeting targets set by the board which could be equal to half the base salary, and if the company exceeded expectations, those bonuses could be double that.
“When you look at that Ebos package, as an example, they had clearly overachieved,” Diver said.
“As I recall, they had some pretty stellar results.”
Executives’ short term performance bonuses were usually measured within the same financial year, and long term bonuses would be based on performance over a three-year period.
“Typically they are tied to shareholder returns.”
Often a portion of the remuneration package was paid in stock options, which was a way of directly “aligning” the performance of the leaders with the fortunes of the company.
“Long term incentives in listed entities are almost always equity-based, so they are issued shares, not cash in the hand.
“The reasons that organisations do that is because they want executives to have part of their remuneration that mirrors the shareholder experience.”
Diver said performance was often also measured by comparing the business against other similar listed companies on the stock exchange.
“‘Did my company produce a better return for shareholders than the median in the NZX50?’ is a good example of a relative total shareholder return measure.”
The taxman cometh
When an individual’s income was extraordinary, so was the amount to be paid in taxes. With an $8.4m salary paid in cash (not stock options), an individual would pay almost $3.3m in taxes, according to Inland Revenue Department’s tax calculator.
What could you buy in Wellington with $8.4 million?
■ Eight average Wellington houses
■ Fix 1680 water leaks
■ Pay for 2.5% of the cost to fix the town hall
■ Buy 150,000 grocery shopping visits at Wellington City Mission’s social supermarket (valued at $56)
■ Pay 12,537 weeks’ rent of an average Wellington rental (valued at $670pw)
■ 120 times the average New Zealand salary of $70,000
NZ CEOs earning big bucks
Other New Zealand chief executives taking home huge pay packets included dairy giant Fonterra’s boss Miles Hurrell, who earned $4.6m, and Fletcher Building’s former chief Ross Taylor, who got $3.7m.
The top earning woman chief executive was Vittoria Shortt of ASB Bank, who took home $3.6m.
The second highest earner behind the Ebos CEO was David Bortolussi of A2 Milk Company, who earned $5.8m.
Other notables included Air New Zealand boss Greg Foran, with $3.1m, and Mainfreight’s Don Braid, who took home $3.5m.