Tuesday, February 15, 2011

Listener - A Bit Rich

“The question is, do you have to give someone an annual cash bonus that is 100% of their salary in order for them to do their job, when they are already earning so much? And do you then have to give over and above that with long-term incentives?”

"Well, yes, you just might, argues Business Roundtable chairman Roger Kerr. He says New Zealand is not in the same league as countries like the US or UK for super-salaries, but it competes with them to attract good people. “This is a story of scarcity value, and exceptionally talented people are sought out in the sporting world, movie world, legal world and management world. And I think it’s easiest to see the value of those mostly in the corporate world in comparison with explaining why movie stars get $20 million for a movie.”

"Kerr likens it to sprinters at the Olympics. “There are a heap of people who can run the 100m between 10 and 11 seconds, but the number who can run it under 10 seconds is quite small, and I think the tail of distribution of executive talent runs a bit the same kind of way.”

"The bottom line is that a good chief executive has to be accomplished at a number of tasks, he says, and can make an enormous difference to a company’s performance."

"…the actual cost of the CEO is minuscule in the overall costs."

"…when you get to a certain size, you are talking about people who could command jobs anywhere in the world."

"His skills are absolutely transferable anywhere in the world, and if you want to have a Chris Liddell come and do that function in your company, then you are going to have to compete to get his attention."

"Auckland-based remuneration consultant Jarrod Moyle says client companies typically ask what they should pay an individual based on the market rate for the role."

“For a CEO role, there are some established facts around what determines the pay – there’s a very clear correlation between the size of the organisation and the CEO’s remuneration. Other factors are the reporting structure – whether it’s to a board of directors, an offshore managing director or the industry. And there might be factors around the organisation’s life cycle – are they in a high-growth stage or are they a mature organisation? Those can affect the size and structure of a package.”

"If the market is slow to react, might growing public debate shame companies and chief executives into moving away from inflated salaries?"

"Hutton thinks not. “They don’t feel any sanction from the social norm because they’re not in that society. The society they care about is their peer group, who are telling each other how well they’ve earned all this …"



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