At-risk salaries also a carrot

How are the country's executives rewarded for their talents in this changing world? JULIE MIDDLETON offers some insight.

Unpalatable it may be, but the way to win the war for talent in New Zealand is to put greater portions of executives' salaries at risk.

This confident assertion comes from Kevin McBride, the manager of Wellington-based national salary surveyors Cubiks.

The way to raise competition, he says, is to increase the percentage of executives' income that is discretionary, and liable to be lost for under-par performance, to the same sort of levels found overseas.

The survey has been canvassing local pay rates on a regular basis under various names since 1959.

The latest survey found that 65.6 per cent of top executives got a bonus based on performance in the year to March. The figure for the previous corresponding period was 52.3 per cent.

The average amount received was $19,129, against an available average of $22,070.

But overall, just 12 to 15 per cent of Kiwi bosses' income is put at risk, and McBride says that is not enough to compete in international terms.

"In Australia, it's 20 per cent, and in the UK, getting up around 30 per cent. In the United States, the sky's the limit - it is often 30 to 50 per cent," he says.

Salaries of our top performers, he says, have started rising towards those of overseas economies, but our lift has been achieved through lifting the fixed portion.

"You drive up costs but don't necessarily get the improved performance you're looking for," he says.

What's our problem? Employers, says McBride, are nervous about rocking the boat; Kiwi executives, happy in their comfort zones, are reluctant to take the risk that they won't be paid out.

But the unhappy compromise - a bonus which isn't really at risk - provides minimal incentive to pick up the pace.

Agreed, striking the right balance is a tricky business, says Cubiks.

Any performance-based system needs to ensure that the hurdle is not unrealistically high, and that it is based on factors genuinely influenced by an executive's performance.

fuxhSo how do I read these figures?

What you're looking at are all the positions from Cubiks' Top Executive Report and a selection of the jobs paying a basic salary of more than $60,000 from its General Staff Report.

No companies are named, but Cubiks says the two surveys cover 503 "members" with a sample size of 17,719 covering 367 positions.

The average sample for each position from the Top Executive Report, for example, was a respectable 78.

You will notice there are a few gaps - how do you accurately canvass consultants, or freelancers in any field?

Positions in fields such as print, television or radio journalism, says McBride, are not covered by either survey because pay in those industries is often defined by fixed pay ranges.

Median salaries - those right in the middle of the range - are given rather than averages, as a couple of big salaries can skew the latter.

So who earns what? The figures from here on down refer to the Top Executive Report, and it says that a total of 85.5 per cent of top executives get packages worth more than $100,000, while 14.7 per cent get packages topping $200,000.

Salaries up: 75.3 per cent of top executives employed for the full year to March received a salary increase.

By how much? Their base salary movement averaged 6 per cent, against a general staff increase of 4.3 per cent. It is the first time the 6 per cent mark has been reached since 1996, says Cubiks. In the year to March 2000, top executives had average rises of 5.4 per cent.

Who got the most? In the year to March, increases of more than 10 per cent went to 19.7 per cent of top executives; the figure for the previous corresponding period was 18.1 per cent.

Overall, 85.5 per cent of executives in the top panel of the graphic earned more than $100,000 in basic pay; 14.7 per cent got more than $200,000.

Of employees bearing the title chief executive "A" - those heading substantial, national, multi-product or multi-divisional companies - 98.5 per cent received a pay packet of more than $100,000.

Of the CEOs described as being on level "B" - typically, those heading subsidiary companies - 93 per cent got base salaries topping six figures.

However, more finely focused number-crunching which marries shares, superannuation and the like to basic salary reveals that the proportion of CEOs in the "A" bracket gathering packages valued at more than $200,000 has increased yet again, up from 67.6 in March 2000 to 75.8 per cent in March this year.

But there has been a downward trend for chief executives in the "C" bracket - those in the public sector, or heading non-profit organisations funded by grants, rates or membership fees.

The proportion who are receiving packages totalling more than $200,000 has fallen from 19.5 per cent last year to 16.2 per cent this year.



Which industries were more generous? Construction, the wholesale and retail sector, food, beverage and tobacco industries and the wood and paper fields were the most generous providers.

In the year to March, the largest movements in base salary went to the top dogs in construction.

They got, on average, an 8.4 per cent increase.

Executives in wholesale and retail fields got 7.7 per cent; food, beverages and tobacco 7.5 per cent, and staff in the wood/paper industry 7 per cent.

And the more miserly? Funnily enough, those companies which swim in cash. Financial institutions gave their stars an increase of just 3.2 per cent.

But fewer people have company cars: The proportion of top executives making their own way to work has increased with each successive survey, and at March this year stood at 45.5 per cent, 4 per cent up on the figure for March the previous year.

The survey says employers are aiming to reduce salary administration and reduce tax liability, and they tend to try to detach cars from positions when staff move on.

"Increasingly, unless there is a direct benefit to the business, there is a strong likelihood that no vehicle will be provided, although some adjustment in the total remuneration package may be made.

"Unlike the situation for general staff, where the percentage of staff receiving cars appears to be relatively stable, the proportion of top executives no longer receiving cars continues to increase."

Extra holidays sought after: Annual leave over the statutory three weeks has replaced company cars as the most popular benefit.

The survey found that 76.2 per cent of the companies surveyed offered this option.

Other benefits offered ranged from professional association fees (offered by 69.8 per cent of companies), sick leave above the statutory minimum of five days (59.8 per cent) and subsidised superannuation (59.2 per cent), to home phone rental payments (55.6 per cent), non-accountable expense accounts (24.1 per cent) and dental insurance (12.9 per cent).

Shares not big raters: Just 2.7 per cent of top executives got an issue of shares in the year to March, with their value ranging from $816 to $116,000.

But the median was a telling $1000 - showing that most executives taking the share option chose parcels at the lower end of the scale.

Cubiks says the relatively small number of companies offering staff a stake as part of their remuneration "continues to surprise, given the overseas trends favouring this option."

Its research has also picked out that although a growing number of companies are putting shares into the benefits pool, they are going to a chosen few.

Links


Cubiks