KEY POINTS:
Although pay has caught up with Australian rates in the past two years, New Zealand still faces a shortage of home-grown chief executive talent, industry observers warn.
A Business Herald investigation of 56 of our largest companies found that on average chief executives got a pay rise of 8 per cent last year, or 32 per cent compared with 2004.
Jarrod Moyle, reward team leader at human resources consultancy firm Sheffield, said executive pay packets of the country's top bosses - those running the top 50 or so companies - were now on a par with those in Australia.
"With many of those organisations there is either a significant Australian operation or ownership interest, so that has a significant influence on the remuneration."
But New Zealand was experiencing a talent shortage "across all positions", he said.
Greg Muir, executive chairman of children's clothing company Pumpkin Patch, believes finding home-grown executive talent will be a big issue for companies in the future "in that we don't have that raft of companies with numerous divisions where people got that experience to be divisional or sector chief executives".
Chief executives would continue to be picked out of Australia because of difficulties in finding top-level talent in New Zealand, he said.
"When I first became a general manager in the 80s and 90s, there was a whole raft of businesses that gave you the opportunity to become a general manager of a business and then progress into becoming a chief executive. With most of those companies gone, or dramatically smaller, I think that is a problem for New Zealand."
Muir's views are echoed by another chairman, who asked not to be named.
"We've got a lot of branches of large companies in New Zealand now, we don't have a lot of people that actually are responsible for the development of strategy and then the delivering of business results against that strategy."
The strategy for many organisations was developed in head offices outside New Zealand, he said. A consequence was the creation of more country manager-type roles at the expense of chief executive responsibility and experience.
However, Auckland International Airport chairman John Maasland says there are some strong younger local candidates coming through.
"I'm not necessarily of a view that a chief executive's role is something you learn by example all the way through," he said. "I think if you have the right skills, the right intellect coming up through a company, you can move into a senior chief executive role without necessarily having had one before."
Mark Harcourt, professor of strategy and human resource management at Waikato University's Management School, says many firms passed up the opportunity to look within their own ranks when appointing a chief executive.
"In many cases it's inside people who know what they're doing, who've got the industry experience, who've got the firm-specific skills ... and many of those people [are] being passed up in favour of outsiders who often stay very little time, often don't know what they're doing, are not familiar with the industry [and] are not familiar with the firm."
Shareholders Association chairman Bruce Sheppard says there is enough talent available in the local market at present but the business environment is not nurturing new leaders.
"Because there has been a gutting-out of corporate activity from New Zealand to Sydney ... middle-management that wish to come back to New Zealand to lead are now way more inclined to go overseas to get their experience."
A significant number of those companies that remained were owned or controlled by foreign organisations which tended to put their own people into critical roles.
"So there is a growing situation where New Zealanders are only employed as the corn pickers, not as the truck drivers and the farm managers."
Sheppard says the way to reverse the trend is to retain local ownership of New Zealand companies.
Million Dollar Executives 2006
* Ann Sherry, Westpac, $3,120,489
* Andrew Ferrier, Fonterra, $2,930,000
* Theresa Gattung, Telecom, $2,907,500
* Ralph Waters, Fletcher Building, $2,883,350
* Graham Hodges, ANZ National Bank, $2,767,233
* Ian Morrice, The Warehouse, $2,346,000
* Evan Davies, SkyCity Entertainment, $1,339,231
* Jim Minto, Tower, $1,262,914
* Keith Turner, Meridian Energy, $1,229,999
* Peter Kean, Lion Nathan, $1,197,175
* John Hirst, Nuplex, $1,062,419
* Martin Simons, APN News & Media, $1,053,657
* John Allen, New Zealand Post, $1,000,000
