Surprise surprise.
The Herald is reporting that Chief Executive remuneration for the recently partially privatised power companies has surged post float. The chief executives have done very well.
New Mighty River CEO Fraser Whineray appears to have received a modest improvement although it is not immediately clear how much he will actually be receiving. He is on a base salary of $850,000 with an at risk component worth up to 35 per cent of that salary and share packages worth up to $200,000 a year. The 2014 annual report stated that the Chief Executive’s base salary for FY2014 was $1,074,244. As part of the Company’s annual remuneration review process in July 2013, this increased from $934,125. If Whineray achieves the full at risk component he will receive $1,147,500 together with bonuses and shares.
Meridian CEO Mark Binns has done well. He has gone from an annual salary in 2013 of $1.1 million with no bonus payments and $42,000 in KiwiSaver contributions to a base salary in 2014 of $1.1 million, a bonus of $690,000 and KiwiSaver contributions of $71,500. He has since received a further bonus payment of $740,000.
Genesis CEO Albert Brantley has not done so well. He has gone from a 2013 salary package of $1.35 million to payments of $1.3 million in 2014 including a base salary of $921,000 and bonus of $334,400 and KiwiSaver contribution of $50,235. His board will decide next year if he gets a one-off bonus payment of $300,000 for managing the transition to a publicly listed company. The way these things go the bonus is almost inevitable.
Mighty River Power CEO Doug Heffernan has seen his income surge. No wonder he was so afraid of Labour’s Power policy. Providing at cost power from power stations the state had built and paid for would have threatened his very comfortable salary. He went from earning $1,200,894 in 2013 to a total of $2,184,828 in 2014 including a base salary of $1.1 million, a bonus of $447,000 and a one-off $500,000 retention payment for agreeing to stay on until August 2014. He also received $64,721 in KiwiSaver payments.
Bill English claims that it is up to the boards to decide on remuneration, but the increases reflect “commercial market rates for CEOs”. Funny that. I thought the mixed ownership model meant that the state retained control over these sorts of issues. He was quoted as saying:
I think it shows that when they were SOEs they were paid significantly below the market rate.
I think it illustrates that now the companies are partially floated there’s a lot more scrutiny on the performance of the chief executives. They do have to be on their toes. They’re under tougher scrutiny to perform.”
This claim about the innately superior ability of the market to instil increased corporate discipline is a myth. The directors are mostly the same. The CEOs are mostly the same. The companies are using power generating assets built up by the state. Fundamentally nothing has changed and if the scrutiny was previously more lax this is a reflection on English and his fellow ministers, not the ability of the state to actually manage something.
But now we have a situation where a significant amount of the dividend stream is paid to private interests, many based overseas. And chief executive pay levels have gone from the stratospheric to the extreme.
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