KEY POINTS:
In the United States more than $1 billion in bonuses for failed Wall St executives have been frozen, politicians around the world are railing against corporate greed and here the squeeze has been put on directors' fees and executive pay rises.
Even Contact Energy, a company with a reputation for bludgeoning its way past the opposition of minority shareholders, has imposed a directors' fee freeze.
For the past 20 years the mantra "greed is good, greed is right, greed works" of Wall Street's Gordon Gekko had its way and was often proved right. Economies boomed and people got richer, at least on paper.
Borrow and consume became the name of the game in many countries including New Zealand, where few voiced objection to seeing their house values soar.
But this month the world financial system went into meltdown, dragging equity markets into the biggest crisis since the Great Depression and pushing the real economy towards recession.
People watched helplessly as savings and pensions were destroyed and governments around the world were forced to pump trillions of dollars of public money into supporting the so-called masters of the universe.
World leaders are scrambling to see off the threat of recession, shrinking economies and unemployment.
And while markets tumbled and banks collapsed, stories of corporate greed and staggering excess grabbed headlines and public attention.
Richard Fuld, chief executive of now bankrupt US investment bank Lehman Brothers Holdings, faced a hearing this month of a congressional committee whose chairman, Henry Waxman, put Fuld in the spotlight for the US$484.8 million ($831 million) of compensation he got since 2000.
"While Mr Fuld and other Lehman executives were getting rich, they were steering Lehman Brothers and our economy toward a precipice," Waxman said.
Fuld said he got probably closer to a quarter of a billion dollars but that it was mostly in stock, which was now worthless.
On Thursday financially troubled American International Group, now supported by a federal bailout, agreed to a freeze in compensation and bonuses from a US$600 million pool for former executives.
Its financial products subsidiary, largely responsible for AIG's fall, has frozen US$69 million for its former boss and about US$93 million that five other top executives might have been eligible to receive.
Now the Government is looking to recoup executive bonuses paid previously.
The outcry on greed reached New Zealand this week with many shareholders at Contact's annual meeting incredulous at a board resolution to nearly double the director fee pool to $1.5 million.
Prime Minister Helen Clark said the directors were being greedy, Contact was extorting customers and people's tolerance for greed was long gone.
National Party leader John Key said Contact should show restraint at a time all New Zealanders were being asked to tighten their belts.
At the meeting on Thursday angry shareholders told directors they had "snouts in the trough" and "should be ashamed of themselves". Wall Street (the movie) was referenced by one shareholder who asked the board: "How many yachts can you waterski behind - how much is too much?"
Nobody's pretending Contact's fee rise is on the same planet as Wall St excesses, and the strength of small shareholder feeling was as much about the long-held views about personnel on the board as the money.
But it was the rearguard response to a growing public relations disaster that was significant for the company with a hang-tough track record.
The total fee pool was increased to $1.5 million with the backing of majority owner Origin Energy, but following an unscheduled board meeting afterwards it was determined base fees would be frozen in an attempt to quell controversy.
The company cited current economic factors but is understood to have been taken aback by the depth of feeling, in spite of widespread coverage beforehand of brewing anger.
Contact's chairman Grant King said before the backtrack on fee increases that "now is not a good time but there's never a good time".
Across the city the same day Vector chairman Michael Stiassny was winning praise from shareholders for not proceeding with a 22 per cent rise.
The insolvency expert has a broader view of business conditions than most and although not the sort to be easily swayed by popular opinion, he said the decision was a simple one to make.
"We are making a very strong statement about 'excess', and we're saying in these circumstances, we don't think it's appropriate," he said after the meeting.
"I don't think it's appropriate for people to take a significant wage increase if the person next door is being made redundant or has just lost their job. I just don't agree with that, and that's what this is about.
"People should be rewarded - [but] I have a view that the future in the next few months is going to be very unsettled and we're going to come back after the new year, and the environment's going to be one that's not great for us.
"Eight weeks before that you don't go and take an increase, it just isn't the right thing to do."
At Air New Zealand, where profits have been squeezed by rocketing fuel costs and now falling demand, the airline has frozen pay for its 13-member executive. The board has also deferred increases this year that were approved last year.
Has there been a culture of excess here?
The Shareholders Association's Des Hunt believes there was among senior directors and executives, although not as much as overseas.
Performance pay criteria have been too short-term, with some executives paid despite failing to hit targets, Hunt said.
"We have no trouble rewarding directors, [chief executives] or employees for long-term performance."
There should be a relationship between senior executive pay levels with the average salary within a company, he said.
"Let's take Contact doubling their directors' fees right, how can you relate that to them telling employees to accept 3 per cent?"
Public agitation towards high pay could grow with the cost of living and squeeze on household budgets.
"It's going to be the people down the line who are going to get hurt more than the people at the top."
Hunt would like more use of performance pay and clearer, longer-term targets.
"Nobody is going to bitch if directors and senior executives turn around and say, 'Look, return on shareholders' funds, earnings per share, has crept up 10 [or] 15 per cent in the last five years, well our bonuses [are paid] accordingly'," he said.
"What we're going to be fighting is their getting it [paid] up front and everyone else is taking the pain."
This year's New Zealand Herald executive pay survey showed an average pay rise for the country's top chief executives of 25 per cent - or 14 per cent when discounting those who left with a golden handshake - with rises of 8 per cent and 23 per cent in the previously two surveys.
Average pay for leading chief executives last year was $1.2 million.
Jarrod Moyle, reward practice manager at human resources consultancy firm Sheffield said as a rule New Zealand had relatively few cases of executive or director pay excess.
"I think we've got a long way to go before we see the excesses that we see particularly in the States with some executive packages."
However, large pay increases in the current economic environment did raise eyebrows.
"It might be very well warranted given maybe it's increasing the size of the company or the role, or to reflect movements in the market, but I think if there is an increase going to be made it needs to be handled delicately," Moyle said.
"But it doesn't mean there shouldn't be any increases."
In these tough economic times it made sense to have a variable pay component, he said.
"So that you are not guaranteeing a high fixed salary despite the performance of the company, which is what does get a lot of people riled up."
Milford Asset Management executive director Brian Gaynor said people were not saying directors were paid too much but there was an issue of the timing.
"[Contact's] doing itself enormous damage from a public relations point of view by trying to push things up by a huge amount in a period where most investors have probably lost 20 to 30 per cent of value in the last year," Gaynor said.
"It's totally insensitive to be doing that in this environment."
Other companies looking to raise directors' fees next week included SkyCity by 27 per cent, Hellaby Holdings by 50 per cent and New Zealand Oil & Gas by 76 per cent, Gaynor said.
Business did not have an automatic right to public approval.
"If when times get difficult it pushes big pay increases or big directors' fees, it's actually putting its head in a noose," Gaynor said.
John McGill, chairman of remuneration and performance pay specialist Strategic Pay, said he would expect to see belts tighten if profits dried up.
In New Zealand generally the overall pay levels were not at the level of equivalent-sized companies overseas, McGill said.
"Certainly in general terms the pay structures of New Zealand private companies and in the public sector, I'd add, are relatively well controlled and moderate, both in the way the schemes are designed, whether it's the incentive pay element or the manner in which they adjust salary levels or benefits."
The use of performance-related pay had grown substantially in the past decade but was nowhere near the levels seen in North America, McGill said.
Executives at large US companies might have 80 per cent of the pay at risk, while those in New Zealand may have between 60 and 80 per cent of packages based on fixed pay and benefits.
The philosophy of performance pay was well established, the means of measurement had improved and most executives were comfortable with it.
"I don't think boards are going to go away from it and it may be that some executives, they might just be dragging their feet in this environment because they're human."
In general McGill expected positive movement in executive pay, albeit at a lower rate, with a wider economic wage inflation of between 3 to 5 per cent likely to slow down.
"The reality should be that if profits are down and companies are having more difficulty, I would expect that to be reflected in incentive pay being much lower."
Additional reporting: Grant Bradley, Errol Kiong
