Magazine article New Zealand Management

Intouch: CEO Pay under Pressure

Magazine article New Zealand Management

Intouch: CEO Pay under Pressure

Article excerpt

Base salaries for chief executives continued to rise ahead of the annual inflation rate in 2008, with a median increase of 5.2 percent on the previous year, according to SheffieldCOs latest CEO Remuneration Survey.

The survey of almost 500 executives in the public and private sectors was conducted over December 2008 and January 2009. It shows that chief executives continue to receive historically high salary gains, with the median base salary now $176,800.

C[pounds sterling]But there are definitely signs this level of increase will not continue in the coming year,C[yen] according to Sheffield reward manager Jarrod Moyle. C[pounds sterling]Many organisations have imposed freezes on executive pay, and we predict a much smaller overall increase of around two to three percent for 2009.C[yen]

Keeping remuneration in check may make good commercial sense in a difficult economic environment, but Moyle warns there is a risk that top talent could become disengaged, particularly when organisations are not able to deliver on performance-based components of an executiveCOs package.

Performance-based pay in New Zealand typically equates to around 19 percent of a CEOCOs base salary. When organisations fail to meet targets, such payments tend to be nullified or significantly reduced. That is shown in the latest survey, with the incidence of performance-based pay declining from 65 percent to 53 percent. And the median bonus payment of $36,670 was only 75 percent of the target payment. This is the lowest level of bonus achievement in the past nine years and could indicate the challenges chief executives face in achieving their performance targets in the current environment. …

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