Bosses flouted PM’s pay cut plan
20% of leaders in public sector ignored call for salary sacrifice during Covid
One in five public sector bosses ignored the Prime Minister’s example and declined to take a Covid pay cut, opting instead to continue pocketing their full six-figure salaries.
Those who did not follow Jacinda Ardern’s lead included judges earning more than $400,000 and chief executives with annual wages as high as $500,000.
A second set of state sector bosses also chose not to make the temporary salary sacrifices, including the heads of research groups Niwa and Plant and Food on pay packets of between $650,000 and $715,000.
A Weekend Herald investigation has found that 17 organisation bosses (20 per cent) did not take a temporary 20 per cent pay cut.
Ardern announced last April during the country’s first Covid-19 lockdown that she and her ministers would take 20 per cent pay cuts for six months in solidarity with Kiwis doing it tough during the pandemic.
She said: “If there was ever a time to close the gap between groups of people across New Zealand in different positions, it is now.
“I am responsible for the executive branch and this is where we can take action . . . it is about showing solidarity in New Zealand’s time of need.”
Officials then wrote to 87 semigovernment organisations — known as Crown entities — encouraging their bosses to follow suit.
Public Service Minister Chris Hipkins was reluctant to criticise those chief executives who ignored the letters, saying there might be good reasons why some did not follow suit.
However, he said the pay cut had been an important way for sector leaders “to demonstrate solidarity with Kiwis during a time of great uncertainty and worry”.
Hipkins also praised the 80 per cent of bosses who voluntarily accepted the cut when many feared the Covid-19 pandemic would bring New Zealand’s economy to its knees and trigger mass job losses.
Many organisations went even further, with their board of directors also taking pay cuts, despite not being directly asked to do so.
However, among those receiving letters but failing to heed the pay-cut call was the Public Trust — New Zealand’s largest provider of wills — and chief executive Glenys Talivai on a salary package up to $529,000.
The group noted that it generated its own income and did not receive taxpayers’ cash.
However, other bosses in similarly profitable organisations did take cuts.
Lotto NZ’s full board and boss Chris Lyman, for instance, all took temporary pay cuts even though the group generated $1.4 billion in sales and handed out $313 million to charities and community groups.
Judges Colin Doherty and Andrew Becroft, in their roles as chairman of the Independent Police Conduct Authority and Children’s Commissioner, also did not take pay cuts.
They earned $465,931 and $272,000 respectively.
The IPCA said judges’ salaries were set in a formal process protected by law as a way of ensuring their independence and impartiality and Doherty’s pay also reflected his ongoing work as a district court judge.
Ultimately, no judges ended up taking pay cuts.
Yet, other public officials in critically independent roles, such as financial watchdog Auditor-General John Ryan, wrote to the Remuneration Authority — which sets judges’ and other officials’ salaries — volunteering to take a 20 per cent cut.
Other bosses not taking pay cuts included the heads of regulators the Electricity Authority (James Stevenson-Wallace on $379,999) and the Real Estate Authority (Belinda Moffat $299,999).
The REA said Moffat only began her tenure in September last year, while former boss Kevin LampdenSmith — who also did not take a cut — left in May. The REA also relied on a levy imposed on real estate agents for its funding.
Others bosses not taking cuts included those at the Health Research Council NZ, NZ Artificial Limb Service, Broadcasting Standards Authority, NZ Walking Access Commission and Te Taura Whiri I Te Reo Ma¯ori (the Ma¯ori Language Commission).
Te Taura Whiri I Te Reo Ma¯ori said its chief executive, Ngahiwi Apanui ($209,000), earned a salary “less than half the average public sector CEO salary”.
The former acting head of regulator the Civil Aviation Authority, Shelley Turner, also didn’t take a pay cut after she stepped up to fill the top role at short notice last year.
Some other bosses received letters and did not take 20 per cent pay cuts but did make other salary sacrifices.
Allan Freeth ($389,999), from regulator the Environmental Protection Authority, said he would sacrifice 50 per cent of his “at-risk performance payment”, while the Transport Accident Investigation Commission’s Lois Hutchinson ($279,999) had holiday leave withheld.
New Zealand Infrastructure Commission/Te Waihanga said its current chief executive, Ross Copland ($319,999), started in June and did not take a pay cut, while its former boss also didn’t take a cut because he was on a “fixed-term” and not deemed a permanent employee.
The University of Auckland said its vice-chancellor, Dawn Freshwater, made “significant” donations to “student and staff welfare funds” but wouldn’t divulge how much she gave.
The heads of every other university openly revealed they donated the equivalent of 20 per cent of their salaries for six months — with the exception of the University of Waikato head, who donated 15 per cent — to welfare funds.
The Weekend Herald also contacted a second set of government entity organisations that did not directly receive letters urging their heads to take pay cuts.
Some, such as Air NZ or electricity retailers Mercury, Genesis, Transpower and Meridian, operate as commercial companies and were only linked to the government because it held ownership shares in them.
Others, however, relied either significantly or fully on government funding. Among those, John Morgan ($714,996) from the National Institute of Water and Atmospheric Research (Niwa) didn’t take a cut.
His organisation handled $159m in revenue over the past financial year with $93.8m of that — or 59 per cent — being from the Ministry of Business, Innovation and Employment alone.
Other Crown research group bosses to eschew a pay cut included David Hughes ($657,544) from Plant and Food, Julian Elder ($503,719) from the Forest Research Institute, known as Scion, and Peter Lennox ($508,743) from Environmental Science Research.
Elsewhere, O¯ ta¯karo chief executive John Bridgman ($633,000) — who oversees the government rebuild of central Christchurch — also didn’t take a pay cut.
His counterpart, Graham Mitchell ($593,592), at Crown Infrastructure Partners, which is helping roll out broadband internet nationwide, didn’t take a cut either.
Sean Sweeney, from Auckland railway builder City Rail Link, didn’t take a 20 per cent pay cut but said he donated a “substantial portion” of his salary to charity.
Overall, the Weekend Herald contacted 130 government entity organisations and collated information from 125 of them.
The Research and Education Advanced Network and Education Payroll were the only two groups that failed to reply.
Of these, 87 organisation bosses —
70 per cent — took a pay cut, while 38 didn’t.
Ardern initially announced she would sacrifice $45,573 of her $459,739 salary last April at the height of fears surrounding the Covid-19 pandemic.
Politicians of all stripes quickly jumped on board as did the heads of
34 government departments — such as the Education and Health ministries — by all volunteering to take 20 per cent pay cuts for six months.
They included director general of health Dr Ashley Bloomfield, who took a $52,800 cut from his $528,000 salary, despite likely being busier than ever leading the nation’s health response to the pandemic.
It was then the Public Service Commissioner wrote to the other government agencies urging them to do likewise.
Most commentators praised both Ardern and the state sector bosses for taking the pay cuts.
However, some questioned whether they were needed at all.
John McGill, head of salary consultants Strategic Pay, was impressed by the speed with which Ardern announced she would be taking a pay cut, saying it struck a tone with the nation.
However, he said the politicians soon discovered they couldn’t legally cut the pay of some officials, such as judges, and became bogged down trying to pass new laws to do this at a time when they had more important things to do.
“So I do think it was a waste of time,” he said.
Most private sector chief executives, meanwhile, had endured pay freezes, but not pay cuts, he said.
Some in badly hit industries, such as Air NZ chief executive Greg Foran ($4.45m), took an estimated 40 per cent cut from his target pay pack.
McGill welcomed the move, saying good leadership was needed in a crisis and, if Foran’s new incentives helped lead the airline back to profits, it would be money well spent.
Yet for all that, McGill still singled out Bloomfield for immediately taking a pay cut, while helping lead the nation through the pandemic.
“I congratulate him for his leadership, it gave us the mark of the man, and it is pretty impressive,” he said.
University of Otago business school associate professor Helen Roberts acknowledged the symbolic nature of the pay cuts, but said they sent an important message.
“It points to culture, where your values lie,” she said.
“We know from the academic literature that the top person really drives the culture of the organisation.”
That was especially important at the country’s universities, which were doing it tough financially due to the fall-off in international students brought about by the pandemic, Roberts said.
It was also important at organisations such as the Fire and Emergency service.
Fire and Emergency boss Rhys Jones ($549,999) did take a 20 per cent pay cut.
Yet the organisation he leads also relied on almost 12,000 volunteers last year and had 23 employees earn more than $230,000 — none of whom were regular firefighters, according to its annual report.
AUT expert in human resources Jarrod Haar thought it was “great” that so many chief executives got on board with the pay cuts.
But he found it “a little disappointing in the ones that chose not to”, especially those earning over $400,000 or $500,000, he said.
They were still very wealthy people, even with a $50,000 salary sacrifice, Haar said.