English criticises Super Fund CEOs pay rise, puts directors on notice

Monday 20th February 2017

Prime Minister Bill English has criticised the board of the New Zealand Superannuation Fund for lifting its chief executive's pay 36 percent last year, and suggested there could be a shakeup in how CEOs of the largest state entities are paid.

At a press conference this afternoon, English said he was disappointed with the board's decision to lift Adrian Orr's salary over $1 million in 2016. As finance minister, English opposed the raise as "too large in the current economic climate" and suggested a 2.5 percent hike instead. The prime minister said the raise would be taken into account when it comes to reappointing board members.

"The discussion we've had about pay is no reflection on the performance of the fund or the professional and managerial competence of the board," English said. "They're public entities, and the government has a view about large remuneration increases. The board's taken a different view. I think any board who takes a different view when it's a 100 percent subsidiary takes risks about tenure."

As finance minister, English said he had engaged in an "unsatisfying annual haggle" with the boards of large public organisations like the Super Fund, that were "a bit overenthusiastic" about how much their CEOs should be paid.

He nominated the Reserve Bank, Accident Compensation Corp and Housing New Zealand as others in the category of very large government entities where chief executives' pay could be an issue.

"There's been pressure on all these salaries - I think it would be better to find a more stable process for these very significant appointments. These are all $20 billion-plus organisations, much larger than almost all of our private sector organisations, but they're still public organisations," English said. "It may be better to, for instance, set a level at the start of an appointment and leave it at that. We've got four of these very large public organisations where this issue keeps coming up, because they're benchmarked against a standard that's not the local standard."

There was also no shortage of applicants for their leadership, he said.

English said there was an opportunity to get a "long-term view" with the pending appointment of a new Reserve Bank governor. Earlier this month, current governor Graeme Wheeler announced he won't serve a second term when his expires in September and will be followed out the door by his deputy, Grant Spencer, in March next year after filling the position on a temporary basis while the next government hunts out a replacement.

Brent King , Managing Director of IRG said “this is a significant development. We have a Prime Minister commenting on the salary of a well performing government related entity. The issue is could you employ a person of Adrian Orr’s quality with a lesser salary. The answer is probably no. I think the market would like to see non performing government related entities targeted to get a better outcomes for the massive assets that the government owns. Housing Corp, NZ Post, Education, road transport etc all need better leadership and better outcomes. A wise leader would review a lot of other Government related entities before they got to NZ Superfund. But of course it is election year and populist comments will be the norm“ said Mr King.

BusinessDesk.co.nz

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