KEY POINTS:
Air New Zealand boss Rob Fyfe's decision to freeze senior executive salaries at the national flag carrier is the kind of leadership more New Zealand chief executives should be publicly emulating during tough trading conditions.
Like many of the country's top corporates facing tighter trading conditions, Air New
Zealand is also reviewing non-essential operations and using natural attrition to reduce job numbers.
The airline is facing a double whammy - customer pressure because of the recessionary environment coupled with persistently high fuel costs, which rose nearly 60 per cent in the past six months.
Air New Zealand's top 20 executives earn more than $250,000 each - roughly six times the average New Zealand salary - so they ought to be able to withstand some belt-tightening. The management bonus component of their pay packets - which is linked to the company's financial performance - will obviously be reduced, so overall remuneration will drop.
But despite the fact that many of our top companies are performing poorly at present, no other CEO has (publicly) followed in Fyfe's steps. This is a mistake.
Companies that value staff loyalty, and have a world view that extends beyond assuaging shareholder concerns over dipping profits at the next reporting cycle, should ensure there is more obvious leadership from mahogany row.
If CEOs want to persuade their staff, particularly those on collective agreements, to accept a smaller wage rise this year, they will be able to exercise more moral suasion if their own salaries are frozen or cut. If CEOs, particularly those of companies preparing to aggressively manage wages, are not taking a wider perspective, then directors should ensure that the impact of the downturn is spread equitably across all strata of the enterprise.
This is an important issue, as most domestically exposed New Zealand companies have not experienced such difficult trading conditions for the best part of a decade. Down-sizing has not been the norm for many enterprises in recent times.
The ability to ride out tough times and carrying staff through, rather than simply going into redundancy mode, is a signal that companies have reached a level of maturity.
A Herald survey earlier this year found the overall pay of New Zealand's top chief executives had soared by an average 25 per cent over the past year. The survey was published when New Zealand was (in retrospect) feeling the recessionary pinch, although Government ministers were still in a state of denial.
Although New Zealand is also clearly exposed to just as much global uncertainty as Britain and Australia, there have been no calls at a political level to exercise wage restraint.
In Britain, Prime Minister Gordon Brown ordered his ministers to give up proposed pay rises as a gesture to underline the importance of pay restraint at a time of economic uncertainty.
In Australia, Prime Minister Kevin Rudd has also promoted a freeze on MPs' salaries until the middle of next year.
The Rudd freeze will save only about A$2.2 million ($2.8m). But that's the point. Basically, Rudd is trying to achieve a change in mindset so top politicians who are calling for wage restraint to reduce inflationary pressure act like role models.
Rudd has also urged the Australian corporate sector, particularly chief executives, to follow his lead and demonstrate wage restraint.
The point of Rudd's proposal is that Australia, much like New Zealand, is at a risk of stagflation - meaning the economy is hit by recession at the same time as it has to withstand inflationary pressures (much of it imported through fuel and food prices).
Unfortunately for the Australian Prime Minister's credibility, he blew it by giving the country's senior public servants an A$1400 ($1780) a week pay rise.
Still, at least he put the issue on the agenda. Let's see more talk on this score here.