Nadine Higgins: No justification for huge CEO pay rises

When CEOs get a massive pay increase so, too, should their staff. Photo/123RF

Opinion

There is a fascinating piece in this week's Listener magazine about CEO pay. It details research that's tracked what's happened to CEO pay relative to workers' pay over an 18-year period.

Back in 1997, chief executives earned 11 times what the average worker earned. By 2015 that multiple had blown out to 19 times. In fact, the researcher says her findings are probably rather conservative.

But conservatively, workers average wages have gone up 91 per cent in the 18 years of the study, while CEO pay has gone up 228 per cent.

At some companies, the CEO now earns 60 times what the average worker does.

Obviously big CEO salaries always garner big headlines and that's not always fair.

There's no doubt if you're managing a multi-million or billion dollar company you should be paid a lot more than someone flipping the burgers or cleaning the toilets.

You've had to work your way up, you probably spent a lot of time and money on higher education and you have a lot of responsibility on your shoulders.

But I cannot see any justification for that gap getting exponentially large.

None.

From all the studies I've looked at, there isn't any. Some research has found CEO pay increases had no correlation to growth in the size of their company.

International research suggests the highest-paid CEOs were often the worst performing. We're always being told about market relativity for CEO pay, but I reckon it's high time there is some relativity to what their workers are paid.

The Listener approached 12 chief executives and asked them about their pay and its relationship to workers pay - and only three actually answered the questions.

That speaks volumes.

If they have a reasonable defence as to why the gap keeps getting wider, then let's hear it.

At a time when inequality is getting worse, a light needs to be shone on the growing disparity and the reasons for it. You can't scoff at a low-paid worker wanting a few extra cents and brush a CEO's double-digit pay rise under the carpet.

Just this weekend fast food workers at Restaurant Brands went on strike after their request for a pay rise was rejected.

This is a company that made $26 million last year. By my back of the envelope calculations, with about 3000 staff in New Zealand, the pay increase would cost them a little more than $600,000 a year.

That's only a bit more than half of the million dollar bonus it paid to its CEO last year. The annual report says staff are fundamental to the success of the company, so let's see proof.

This isn't about the politics of envy. If a CEO does well and grows the company, I believe he or she deserves to be rewarded.

But it's about sharing the spoils, the CEO didn't get there alone.

When the company is doing well, the people who work there and contributed to that success deserve a share of the spoils, too, just like CEOs do. When times are tough CEOs need to share in the pain, just like workers do.

Air New Zealand did it last year. When the carrier reported a record profit, all staff got a $2500 bonus. Everyone.

That is how is should be.