More chief executives refusing performance pay deals

New Zealand's chief executives are shying away from accepting a performance pay component in their remuneration packages - and the labour shortage means their demands are being met.

Recruitment company Sheffield's chief executive survey found about 60 per cent of chief executives now have a performance component to their pay packages, down from 69 per cent last year.

The drop breaks with a decade-long trend of rising numbers of executives having performance components to their pay packages. "While one statistic does not make a trend, this is certainly an alarming finding," said Sherry Maier, Sheffield reward practice manager.

She is a believer in performance incentives, saying they align the chief executives' interests with those of the company.

The survey includes data from 502 managing directors, chief executives and general managers.

Maier said given the healthy state of the economy, the decrease in performance pay popularity was unlikely to be because fewer chief executives were meeting their targets. "It may be due to fewer organisations offering any type of performance pay to the chief executive. That could indicate that, given the talent shortage, companies have eliminated performance pay and offered a guaranteed cash package in order to attract candidates," she said. "Also, a lot of businesses have tried performance pay and not done it well."

For the first time, Christchurch chief executive total salary packages have overtaken those of their Wellington counterparts.

Auckland chief executives remain the highest paid in the country, having taken over from Wellington five years ago.

Some of this may be because Wellington has a higher proportion of public sector organisations - which tend to pay less.

The median total cost package was $300,000 in Auckland, $255,900 in Christchurch $255,000 in Wellington.

The average increase in CEOs' base salary, year on year, 5.2 per cent, identical to the percentage in 2003.

Typically, performance incentives make up 15 per cent of packages, lower than in Australia where they account for 30 per cent to 40 per cent.