Obscene

Written By: - Date published: 10:59 am, April 11th, 2009 - 31 comments
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Rob Fyfe, CEO of Air New Zealand has seen a pay rise of 93%.

The Herald reports that before his pay was frozen in July, Air New Zealand CEO Rob Fyfe nearly doubled his pay – his package rising from $1.61 million to $3.1 million.

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With the economy in freefall and people’s jobs increasingly at risk from National’s startlingly inadequate response to the crisis it’s good to see that the country’s business leaders tightening their belts like the rest of us.

31 comments on “Obscene”

  1. Hilary 1

    That will be distorting the ‘average wage’ figures even more. The media will continue to portray the mean wage which has been dragged upwards to almost $50,000 by a few of these extreme salaries as a median which is actually a half way point. Our NZ median is $28,000 and rapidly dropping I would suggest.

    What this distortion does is make people think that the mean/average wage of almost $50,000 is somehow the norm. That is very disempowering for the majority of people trying to live on $28,000 or less. The basic unemployment benefit is under $10,000.

  2. gomango 2

    What on earth was Air New Zealand’s largest shareholder doing?

    Lets check the shareholding register, and see who controls Air NZ. Whoever let that happen (as owner of the business) should be publicly flogged.

    Any idea who the main shareholder is? And which particular individual was responsible for not sorting this out properly in July 2008?

    • gingercrush 2.1

      The government is the largest shareholder and of course until November Labour was the government.

  3. dad4justice 3

    Hypocritical CEO’s on the government gravy train make me frigging sick. The old boy network thrives in such a twisted country.

  4. outofbed 4

    I have always struggled with the obscene discrepancy in pay rates
    the cargo loaders at air nz start of on around 15- 16$ per hour
    If they fuck up, planes crash.
    Why can’t we have a minimum wage tied to a maximum wage.The max can only be ten times the minimum .wage

    It would only affect a few percent of the population namely the ones earning over say $150 000

    Who would complain about that ?

  5. gomango 5

    outofbed – first year economics and empirical evidence is pretty clear about the real effects of subsidies, quotas, price controls etc. You may not be old enough to recall the muldoon years and the distortions caused by interventions along the lines of your suggestion. Fundamentally those distortions in our economy were why we then had the David Lange/Roger Douglas/Richard Prebble/David Caygill/Phil Goff/Helen Clark/Michael Cullen economic rationalist pain of the early 90’s.

    If you frame the question as a political question its certainly sensible to ask but only if you accept the economic implications of what you suggest.

    Personally, in the 2009 tax year I would have been horrified at your suggestion [you lousy stinking communist]. This tax year I think your suggestion has substantial merit and I applaud your social values.

    And Gingercrush – thank you very much for your consideration in pointing out the bleeding obvious. On behalf of all the mentally defective people who read the standard I thank you. Do you have a link to support your assertion?

  6. Brett Dale 6

    Is Air New Zealand owned by the government? Does it get money from the tax payer?

    If its a private company, then why is it your business?

  7. Sean 7

    Brett Air New Zealand is majority owned by the Government. It returns a profit to the taxpayer. Even if that weren’t the case, it would still be the public’s business.

    Responding to gingercrush. Of course shareholders don’t set CEO’s pay but they can have the board that gave him this pay increase sacked

  8. gomango 8

    The shareholders can direct the Directors to set the CEO’s pay as long as it is consistent with the constitution – and given HMG bailed out Air NZ I’m sure they have that explicit power (or should have) without having to resort to resolutions etc. When taking over a bankrupt company you alway give yourself pre-emptive rights and veto powers.

    If the directors don’t like taking orders from the shareholder, their only option is to resign before being sacked.

  9. gingercrush 9

    I don’t remember me actually saying shareholders set the CEO pay.

  10. Sean 10

    no but you did try to blame the shareholder for the decision on the CEO’s pay. same thing.

    I wonder how close Fyfe’s pay increase comes to paying to the pay parity that the Zeal 320 flight attendants are demanding. Say pay parity costs $10,000 per flight attendant – Fyfe’s pay increase would pay for 150 flight attendants to get fair pay.

    Fyfe should go and if the board won’t fire him, they should go.

    • gingercrush 10.1

      Well the shareholders do appoint people to the board. Seems to me if you’re wanting accountability you expect the board to fire him and if they don’t you expect the board to go. Well the only ones that have the power to do that are the government themselves. And of course you can’t take such actions when this was done before July last year.

      • Sean 10.1.1

        why not? The issues has come to light now, the board and Fyfe are still in place.

  11. TightyRighty 11

    obscene? before july last year we weren’t even in a technical recession according the government and the reserve bank. so why is it only obscene now? is it because you have a picture of rob and john?

    it’s almost the same question i ask myself when cabin crew contracted to air nz strike now. why not last year? surely the differential in pay rates hasn’t changed that much in 6 months?

    silly unions, getting involved in politics by trying to cause industrial strife on a major public break.

    • Rex Widerstrom 11.1

      Yes I detected a wee bit of mischief in the choice of photo too, TightyRighty.

      However it does illustrate an interesting point.

      One of these men runs an entire nation and is, in theory at least, answerable to every one of us. Certainly he must perform his job to the satisfaction of the majority or he gets the sack in 3 years.

      The other man runs a a somewhat small and – in international terms – insignificant airline. He can thumb his nose even at the few NZers who own shares in his enterprise, and be as inept as he likes while enjoying a relatively greater degree of job security.

      Yet he earns ten times the salary of the first man.

      Obscene? Depends on your perspective. Ridiculous and unnecessary, when there are intelligent and ambitious NZers who’d make as good, if not better, fist of it for a tenth of the pay? Definitely.

      • TightyRighty 11.1.1

        your analysis is good rex, and thank you for pointing out something i had overlooked in my rush to throw fuel on the fire.

        My problem lies though in the belief, mistaken or otherwise, that their is, or at least we were promised, ministerial oversight on Air NZ, not least because ministers are always flying. So all this happened under the old governments regime, so why is it that the current government seem to be accused in this article of being the cause of this “obscenity”? perpetuating, sure. causing? unlikely.

  12. ak 12

    Not only obscene Rex, but out-and-out murderous if we look at the evidence in Idiot Savant’s excellent recent post. Here’s a snip:

    Income inequality, they show beyond any doubt, is not just bad for those at the bottom but for everyone. More unequal societies are socially dysfunctional across the board. There is more teenage pregnancy, mental illness, higher prison populations, more murders, higher obesity and less numeracy and literacy in more unequal societies. Even the rich report more mental ill health and have lower life expectancies than their peers in less unequal societies.

    http://www.norightturn.blogspot.com/ “An empirical argument for the left”

    • Rex Widerstrom 12.1

      Interesting stuff. Thanks for that ak, I’d missed that post. I now want to read all the original research and I’m meant to be working to a deadline… that’ll teach me to make a “quick dip into The Standard” as a break from work.

      There seems – at first and very brief glance – to be two parallel causations being argued: social inequality and income inequality as causes and predictors of health (with I/S seemingly suggesting the elevation of some to Knight- or Dame-hood will have a deleterious physical effect on other, more humble folk).

      While I accept the Whitehall studies certainly make a case for the former, it seems to me that the exaltation of someone as “Sir” or “Dame” can only have a negative effect on my health if I let it. Similarly, with the examples cited in the Whitehall studies, if I’m happy being a messenger or doorman I’m probably going to live longer than if I’m not.

      Income inequality is of course inexorably entwined with social inequality and thus hard to separate as causation, though it seems the Whitehall studies tried to.

      But – to play devil’s advocate here for a moment – I wonder if a similar study undertaken a century earlier would have had the same outcome? I ask this because in those days virtually no one thought to question the English class system, and thus the “lowly” messenger would probably have taken pride in his work and not felt he was being denied some better future by those in higher positions. There’d have been no simmering resentment and thus no stress.

      I’m not in any way advancing this as a desirable state of affairs. But it does make the point that – insofar as social inequality unrelated to income is concerned – its effects are only felt if we allow ourselves to feel them.

      Frankly I don’t give a toss if some complete plonker gets a knighthood (and conversely, when someone deserving of recognition gets one, I feel gratified they’ve been thanked in that way, if that’s what they wanted).

      In other words, that Rob Fyfe can afford to eat better than I do and take longer holidays and doesn’t have to worry about where his next paycheque is coming from probably means he enjoys better health than I do.

      But that he has greater “social status” will only affect me if I let it… that he drives a better car, lives in a better house, wears better clothes and takes his holidays overseas will only touch on the way I feel if I subscribe to feelings of envy and inadequacy, which translate into dissatisfaction and stress, which in turn translate into ill-health. And thankfully I don’t.

      • ak 12.1.1

        Yep, and church, state and every other power elite since the year dot have tried to eliminate “envy” – but only succeeded in suppressing it. Because it’s not a choice: rather a hard-wired function of our strongest instinct – survival.

        And at the extreme (for millions), babies starve as we speak. Get yourself really hungry, Rex, and try not allowing yourself to covet that delicious roast meal wafting from your neighbour’s table – or to feed your starving kids by nicking some of it.

        Easy to suppress envy when survival is assured, but it’s still ever-present in direct inverse proportion to one’s relative comfort level. As natural and undeniable as the sex-drive (and ironically, strongest in righties), but like all stress, a killer over time, as this study shows.

        • Rex Widerstrom 12.1.1.1

          There’s no comparison between the desire to eat to survive (income inequality) and the kind of social inequality studied in the Whitehall studies, ak.

          I’ve been on the dole with four kids plus my stepdaughter’s pregnant friend to support so I know what hunger feels like (and walking through Lower Hutt watching people with jobs stuffing themselves in restaurant windows). And, as I’ve admitted before, during earlier hard times I’ve pinched milk and bread from mailboxes and beer crates from behind the pub to “furnish” our “home”.

          As you point out I can’t control feeling hungry, and wishing I had the food on someone else’s table. I’d go so far as to say that in any moral society I should have some right to a proportion of that food (assuming the person whose roast I was smelling had enough left to feed their family).

          But a knighthood? Or a Lamborghini? Or a CEOs job? Or any other status symbol? I don’t need those things. Nor do I (or anyone else who hasn’t worked for them) deserve them. Therefore to want them, and to feel put out someone else has them, isn’t about survival it’s just envy and a misplaced sense of entitlement, and a world away from the real entitlement one has to food, shelter, warmth etc.

          As long as knighthoods and fast cars aren’t gained at the expense of people being able to enjoy a decent life (and I accept that at present that is often the case) I have no envy of those who have them.

          Indeed rather than envy most of the people who have such things, I pity that their sense of self-worth (or virility, perhaps, in the case of fast cars) is so low as to covet them in the first place.

  13. felix 13

    From the facial expressions I’m pretty sure they’re watching 2girls1cup.

  14. pk 14

    There was a nice article in New Scientist, that I can’t find the link for, that in short stated because of statistical spread, if a society gets better off then some in that society will become insanely well off eg Gates. So, we need to be careful not to criticise just because someone is very well paid because that will happen and it’s a bit like we don’t get to marry Jennifer Aniston. That’s life. Some people will be very lucky, talented,rich etc

    We also need to differentiate where people make money based on their own level of risk taking rather than receiving large rewards in a salaried type manner with minimal risk. If someone has a business that earns them an extra $1m this year then is a reasonable likelihood they personally did something to warrant it (whether it be invested their own money or built or company etc) and that there was risk to go with the reward.

    That aside, Buffet, arguably one of the best capitalists (and one who pays himself less than the PM and risks his own money every day), actively avoids companies where the executive pay is excessive. There are several reasons for this but the most common he states are:

    1) Such pay tends to encourage game playing (to increase reward as they are invariably set on some performance basis) and tactics that are not in the best interests of the owners (shareholders).

    2) There appears to be a measurable NEGATIVE correlation between excessive pay and company performance ie paying too much actually reduces company performance. There is no evidence that high executive pay leads to better company performance

    3) It disassociates the executive from the workforce. People have a sense of fairness and a perception that the company is not a common team working to common aims tends to reduce performance.

    Buffet will invest in organisations where the executives have similar reward and risk profiles to the shareholders and where there is sufficient risk/reward to drive the executives and that the rewards are deserved and not accidental.

    Why the waffle? Fyfe was lucky enough to be in charge when economies were singing and Air NZ benefited on the back of that. The bulk of his pay rise was performance related, I understand, but not a performance gain he can say he drove. He was just lucky. In these circumstances it’s really stupid to have such a performance regime. If he had taken an airline struggling to survive and driven a $100m profit improvement in circumstances where other airlines had not done this then if I was a shareholder I would support such a pay rise but that’s not what he did.

    Also, in the light of fairness, he will receive a similar pay cut this year so there should be a headline pointing out his 50% cut.

  15. Daveski 15

    Classic – this happened under Labour’s nose yet there’s an attempt to attach blame to the Nats.

  16. Steve Reeves 16

    I always wonder, what do you need all that money for? Seriously, this guy earns in a year about six times what I will have amassed (if I’m lucky) in an entire working life, and I’m very well paid—so what does he really need it for? I’m not talking envy here, just real curiosity.

    Why do you need or want so much money?

  17. Stephen 17

    Why do you need or want so much money?

    As i’ve graduated from student to decent earner, i’ve found more things which in my view makes my life ‘better’, not just from student to earner, but from low-medium earner to medium earner. I was well above ‘survival’ at low medium and at where I am now it’s not too bad at all, but I would be very miffed if someone deemed that my lifestyle was excessive in some way – it’s what i’m happy with, so everyone can back the hell off…maybe the really rich feel the same way?

    • Steve Reeves 17.1

      Yes—but what, practically, is the point of so much money, and wanting to have it.

      I’m not talking about the difference between being badly of and well (or comfortably) off—I’m talking about earning more in a year than most people will have in a lifetime! What is it for? Why do people want it? It has no practical value, in the sense of making your life better, because after you’ve reached a few hundred thousand a year you’re already spending as fast as you can. So what is the several million a year for, in a practical sense?

  18. ripp0 18

    how interesting that a titled “Obscene” thread should produce such an interesting kiwi perspective. Had me wondering whether some could be annotated for the upcoming T/take offering..

    which would put it alongside Krugman(says financial deregulation likely cause of greater inequality in the US economy) Tett of the ft (corporate profits growth is a specific relational cause) and Johnson(IMF) who has his own very interesting global pov..all of whom enjoy some very insightful commentators..

    it’s a week away at least but they could take a snip or so.. alternatively run a bigger piece of this pie in the homegrown version due anytime soon.. though I have to tell you there are a lot of pies coming out of enzed politics/business these days..

    • Pascal's bookie 18.1

      Hey ripper, a wee bit sidetracking, and a few steps above the AirNZ’s payscale, but seeing you diverted first, with some references to some interesting views…

      … few linkies if you’ve not seen them over the last coupla weeks. And others may find something of interest. There seem to be a few about that might enjoy/have interest.

      Bill Moyers on PBS interviewing William K Black (one of the guys that busted open some of the S&L fraud fandago under Reagan’s presidency.)

      WILLIAM K. BLACK: Because they didn’t even begin to investigate the major lenders until the market had actually collapsed, which is completely contrary to what we did successfully in the Savings and Loan crisis, right? Even while the institutions were reporting they were the most profitable savings and loan in America, we knew they were frauds. And we were moving to close them down. Here, the Justice Department, even though it very appropriately warned, in 2004, that there was an epidemic…

      BILL MOYERS: Who did?

      WILLIAM K. BLACK: The FBI publicly warned, in September 2004 that there was an epidemic of mortgage fraud, that if it was allowed to continue it would produce a crisis at least as large as the Savings and Loan debacle. And that they were going to make sure that they didn’t let that happen. So what goes wrong? After 9/11, the attacks, the Justice Department transfers 500 white-collar specialists in the FBI to national terrorism. Well, we can all understand that. But then, the Bush administration refused to replace the missing 500 agents. So even today, again, as you say, this crisis is 1000 times worse, perhaps, certainly 100 times worse, than the Savings and Loan crisis. There are one-fifth as many FBI agents as worked the Savings and Loan crisis.

      BILL MOYERS: You talk about the Bush administration. Of course, there’s that famous photograph of some of the regulators in 2003, who come to a press conference with a chainsaw suggesting that they’re going to slash, cut business loose from regulation, right?

      WILLIAM K. BLACK: Well, they succeeded. And in that picture, by the way, the other — three of the other guys with pruning shears are the…

      BILL MOYERS: That’s right.

      WILLIAM K. BLACK: They’re the trade representatives. They’re the lobbyists for the bankers. And everybody’s grinning. The government’s working together with the industry to destroy regulation. Well, we now know what happens when you destroy regulation. You get the biggest financial calamity of anybody under the age

      …and here’s Elliot Spitzer , infamously stupid go getting lawyer type, got himself resigned over a sex scandal, conveniently outed based on wire taps. Wire taps bust on prostitution scandal. Could happen to anyone. ‘cept it hardly ever does… Not conspiracy talk. Just saying.

      Wall st rallied on the day he quitski. funny that….

      ZAKARIA: So, they were basically fudging the numbers to make it seem as though they had a stronger balance sheet than they had.

      SPITZER: Precisely. That’s exactly right.

      And the underlying effort was to create an illusion of financial strength that was not there. And as we dug more deeply into the underlying structure and organization and accounting that was ongoing at the company, we knew there was a problem.

      And just parenthetically, four people have been convicted of this. The former CEO was called an unindicted co-conspirator in the federal courtroom by the federal prosecutor. So, this was a fundamental effort to alter the actuality and to lie to the public.

      ZAKARIA: So, do you think that the problems that AIG got into later on stem from some of the same practices that you were trying to get at?

      SPITZER: They stemmed from an effort from the very top to gin up returns whenever, wherever possible, and to push the boundaries in a way that would garner returns almost regardless of risk. And so, to the extent that there is a discussion, did this begin before or after the tenure of Hank Greenberg, it’s unambiguous — unambiguous that the structures and the flaws and the policies began while he was there. That is why the board that he had controlled with an iron fist asked him to leave. It was their decision — not my decision, their decision — to ask him to step down, something that was then and is now very unusual.

      He has invoked the Fifth Amendment, which, of course, is his right to do. But he was asked to leave by his own board, because they saw the flaws and the problems that have since multiplied and created this monster that can bring down the financial system.

      Back then I said to people, AIG is at the center of the web. The financial tentacles of this company stretched to every major investment bank. The web between AIG and Goldman Sachs is something that should be pursued.

      And as I have written…

      …and finally an older less specific piece to tie things all-together . that one explains the first two. Speaks of prediction 16 years back, same stuff again but previous, S&L, rinse, repeat.

      This one also ties in nicely to RedLogix’ thread re the ‘too big to save’, and the results of that concept on behaviour.

      In a word, the investors looted. Someone trying to make an honest profit, Professors Akerlof and Romer said, would have operated in a completely different manner. The investors displayed a “total disregard for even the most basic principles of lending,’ failing to verify standard information about their borrowers or, in some cases, even to ask for that information.

      The investors “acted as if future losses were somebody else’s problem,’ the economists wrote. “They were right.’

      On Tuesday morning in Washington, Ben Bernanke, the Federal Reserve chairman, gave a speech that read like a sad coda to the “Looting’ paper. Because the government is unwilling to let big, interconnected financial firms fail — and because people at those firms knew it — they engaged in what Mr. Bernanke called “excessive risk-taking.’

  19. Stephen 19

    So what is the several million a year for, in a practical sense?

    I think the key is that it is well known that most people get used to their lot pretty quickly, and always aspire to something more, though perhaps not necessarily material goods – I work in the charitable sector, and many are looking to put their money to work for other people, so we don’t really mind…

  20. Kevin Welsh 20

    I’m curious.

    What did Rob Fyfe actually DO, to double his pay from $1.6M to $3.1M?

    Has he been moonlighting as a pilot flying into places like Hong Kong or Wellington for around $250K a year?

    Maybe he has been doing baggage and fuel calculations. You know, those pesky little details that get done before every flight to ensure you don’t end up as a crispy critter after your flight turns into a fireball, ’cause some grunt on the ground can’t count.

    Or maybe he has ben preparing in flight meals a t minmum wage?

    So, what the fuck did he actually DO?

    And don’t give me that load of bollocks about “performance based” because I don’t see him at the check-in with a welcoming smile dealing with the ignorant assholes that seem to congregate at airports.

    The staff on the ground, behind the check-in, the flight crew… those are the people I see putting in the performance everytime I fly. Do you think their “performance-based” bonus (assuming they get one, of course), was doubled in the last year?

    Doubt it.

  21. Stephen 21

    So, what the fuck did he actually DO?

    Try not having someone lead your international corporation and see how that goes. But yes, it is very bizarre what happened to his pay.

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