CEO pay: Highest-paid public sector bosses

Highest paid public sector bosses 2024: L-R - Peter Reidy (KiwiRail), Margie Apa (Te Whatu Ora), Jon Lamonte (ex Water Reform Transition), Dawn Freshwater (University of Auckland), Colin Crampton (ex Water Reform Transition), Alison Andrew (Transpower).

The country’s public sector bosses generally received muted pay boosts in the last fiscal year, as the climate of wage inflation registered more significant increases among the lower ranks.

A Herald analysis of chief executive pay in the sector shows that the heads of the country’s state-owned enterprises (SOEs) – the likes of KiwiRail and Transpower – took home both the biggest pay packets and enjoyed the heftiest increases in the year. SOEs are Crown-owned companies, and they’re expected to be profitable, efficient and comparable to private businesses.

As such, SOEs were unaffected by the official public sector pay restraint of recent years, and their increases have more closely mirrored the fatter rises in private sector pay over the period. Remuneration advisers, Strategic Pay, reported that pay increases for the heads of medium-sized and large private sector organisations peaked in the year to March 2023 at 7.6%.

Peter Reidy, chief executive of KiwiRail. Photo / Tim Cuff

Peter Reidy of KiwiRail was the highest-paid public sector boss in fiscal 2023/24. He earned $1.78 million, the main components of which were: a base salary of $1.26m; short-term incentive performance pay of $323,000; and a one-off $200,000 payment for “foregone equity in previous employment”, agreed prior to Reidy’s hiring in August 2022.

Transpower’s Alison Andrew took home the second highest pay, $1.66m, including performance incentive pay of $450,000. Reidy’s pay was a whopping 29% higher than the previous year, and Andrews was 6% higher.

It’s important to note the performance-related pay for both Reidy and Andrew was earned in fiscal 2022/23. Reidy took the top job at KiwiRail in August 2022 and consequently received no incentive-related pay in his first 11 months.

Transpower chief executive Alison Andrew. Photo / Peter Meecham

Both KiwiRail and Transpower were wracked by poor performance in fiscal 23/24, including huge cost overruns on the ferry and wharf replacement programme at KiwiRail and serious safety lapses at both entities.

In June, human error caused a Transpower electric tower to topple, including two high-power electric lines, and left much of Northland without electricity for several days.

Third among the best-paid of the SOE bosses was David Walsh, the head of NZ Post, on $1.17m.

In past years, the chief executive of Guardians of New Zealand Superannuation has registered as either the best-paid or among them. However, in 23/24 a change in the top job pushed the entity lower across the comparison. Matt Whineray left the role in January 2024, and Jo Townsend took it up in April. Whineray earned $947,000 in the first six months of the year, including performance pay.

This made him the best-paid public sector CEO on a prorated basis. Townsend’s annual base salary was $853,000 ($17,000 below that of Whineray), but she was not eligible for performance pay in her initial period of work. She earned $197,000 in her first few months on the job.

Official restraint of CEO pay

From 2020 to early 2023, previous governments significantly dampened pay increases for most public sector bosses. In addition, many CEOs took a voluntary 20% pay cut for six months during the Covid-19 pandemic. Pay packages for chief executives across the core of the central government rose between just 1% to 2% on average in fiscal 23/24. While pay for the heads of the departments and departmental agencies of the public service rose 1.1% and for those heading Crown entities and agents it increased by 2%. The average increase across public service chiefs of the last five years was just 3.8%, and their average salary sits just below $500,000 per year.

Extraordinary pay for heads of mega-entities

SOEs were not the only public sector group unaffected by the official pay restraint of recent years. Some CEOs, minted through the last Government’s considerable efforts at centralising parts of the public sector through the creation of mega-entities, were also seemingly immune.

Dr Jon Lamonte.

Among these, Jon Lamonte stands out as the highest paid public sector head last year, outside the ranks of the SOEs. Lamonte fleetingly headed one of the last Government’s new water services entities, and received an extraordinary $924,000 in salary and payouts for just five and a half months’ work, from July 1 2023 to mid-December of that year.

In addition to his salary (prorated from an annual base of $710,000), Lamonte received two one-off payments: redundancy pay of $355,000, and a previously unreported payment “in lieu of notice”, which appears to have been in the region of $200,000.

A Public Service Commission (PSC) spokesman confirmed that none of a total of four exceptionally well-paid water services establishment chief executives, including Lamonte, were included in its pay increase calculations for the year.

The water services CEOs were all paid over $710,000 annually (before special one-off payments), more than 40% higher than the public service average. As establishment chief executives, they were paid by the Department of Internal Affairs (DIA). Fiscal years differ across public entities, and the entities do not all disclose chief executive pay across the same 12-month period.

The Herald’s analysis compares pay across the most recent, disclosed, full 12-month period, and adjustments have not been made to allow for partial year comparisons. The totals include redundancy and other one-off payments, as well as salary.

The public service, Crown entities and agents

Behind Lamonte, Fepulea’i Margie Apa earned $895,000 at the helm of Health New Zealand Te Whatu Ora, which was created in 2022 through the merger of the country’s 20 District Health Boards (DHBs).

Fepulea’i Margie Apa heads up Health New Zealand Te Whatu Ora.

Apa made $592,000 in fiscal 20/21, her last full year as head of Counties Manukau DHB (the total reflected a voluntary pay reduction in the period, related to Covid-19).

Apa’s higher pay at Health NZ is clearly linked to the huge increase in job size, which includes managing over 80,000 staff. While job size is generally an important determinant of pay in the public sector, pay levels remain considerably lower than at similarly sized private sector businesses.

Dawn Freshwater, vice-chancellor of the University of Auckland.

Behind Apa, vice-chancellor of the University of Auckland, Professor Dawn Freshwater, earned $766,000, a 1.5% increase over the previous year.

Colin Crampton was the next-highest-paid. Like Lamonte, Crampton was the establishment chief executive of a water services entity (the entity he was hired to run was scrapped by the Labour Government and never established). Crampton took redundancy pay of $355,000 in 23/24, and in addition, earned a salary in excess of $710,000 until his departure on December 15. He worked just five and a half months of the year.

Crampton was followed by NZ Transport Agency Waka Kotahi head Nicole Rosie, on $736,000, and Andrew Mckenzie of Kāinga Ora–Homes and Communities, on $731,000.

Performance pay and the direction from here

Cathy Hendry, managing director of remuneration advisers Strategic Pay, told the Herald that the pay increases for private sector chief executives peaked most recently in early 2023.

She said the public sector experienced a much more muted and delayed rise in CEO salaries; a typical pattern, since public sector changes usually lag those of private businesses in the economic cycle. Hendry said, given the Government’s emphasis on cost-cutting, she expects pay increases for public sector heads to reduce to perhaps as low as a 1% increase over the current year.

“If an organisation is cost-cutting and the story is belt-tightening, it’s really not a good look for the CEO to be getting big pay increases,” she said. However, the reintroduction of performance pay for public service bosses is expected to be inflationary, a PSC spokesman confirmed – public service CEOs’ average salaries dropped after 2018 when performance pay was eliminated by the Labour coalition Government.

What remains unclear is when the new policy, confirmed in a recent government statement but not yet designed, will be introduced. Public Service Minister Nicola Willis has previously said that the introduction will happen by the start of fiscal 24/25, but her office declined to confirm that timing this week. A spokesman for Willis directed the Herald’s questions to the PSC.

The PSC spokesman said the agency, which is responsible for the design and implementation of the policy, cannot yet confirm the timing for its introduction. Since the related assessment period for chief executive performance is expected to be at least 12 months, and related pay is typically awarded thereafter, the effects of the policy are likely still several years off.