Pay at the top

This article was produced in partnership with Strategic Pay.

Significant CEO turnover; greater transparency around pay; and increasing value placed on long-term incentives (LTIs). These are some of the key insights from surveys carried out by remuneration consultants Strategic Pay over the past year, summarised in their Pay at the Top 2021 booklet. A valuable resource for organisations as they shape and refine their post-COVID strategies, the booklet sheds light on trends and practices relating to the pay of chief and senior executives, and director fee levels.

The findings also throw up important questions around attraction and retention at senior exec level, and the impact of COVID and the talent drought on corporate behaviour.

“We analysed data from 112 NZX listed organisations, and 22% of those companies had appointed new CEOs and MDs in the past 12 months. What does that tell us?” said Strategic Pay Southern consulting manager Michelle Read.

In survey interviews, board chairs had reported that dealing with the pandemic was no longer an ‘emergency response situation’, but business as usual. Business as usual, but perhaps – added Strategic Pay managing director Cathy Hendry - requiring fresh thinking and talent, thus contributing the high CEO turnover?

Interestingly, Strategic Pay’s most recent pulse survey reveals that in non-listed organisations that had decreased or increased their tally of executives, the main reason was a new CEO taking the company in a fresh direction. “Does that suggest we are seeing CEO turnover in the unlisted environment too?” mused Hendry.

The drought is real

The Pay at The Top report reveals that the much-talked-about talent shortage is being felt at senior exec and CEO level too. “There’s also a lot of churn with specialist roles somewhat impacted by closed borders”, said Hendry.

In the most recent survey, CEO and executive attraction and retention were among the biggest challenges facing organisations in the next 12-18 months.

This could be what’s driving the big increase in Strategic Pay clients seeking guidance on ‘stickier pay’ – long-term incentives such as cash or equity that is paid out over a longer period.

Read had noted boards increasingly eyeing incentives that keep executives invested in the company for three years rather than one.

Another key finding in the booklet is that “no one is talking about pay cuts anymore”, said Hendry.

“When we had the first lockdown last year, there were pay cuts across the board. Yes, there has been pay restraint over the past 12 months, which you would expect. But we haven’t seen a massive backwards slide.”

There was also a greater appetite for pay transparency. The Corporate Governance Code requires that the remuneration of directors and executives at NZX-listed companies “be transparent, fair, and reasonable” and the bar is constantly being raised, said Read.

“That visibility is especially important in a talent shortage market because employees can be more picky about where they work. New Zealand doesn’t have requirements to report on pay gaps in the private sector but more organisations are voluntarily reporting on it, using it as a point of difference to say ‘yes, we have a gap but we are looking into it so we can rectify it’.

What’s happening at board level?

 Almost half (47%) of boards felt they were putting in more hours, with the overwhelming majority (82%) spending more time on risk management issues. Board meetings were also more frequent, and longer.

The gap between private and public company directors’ fees was similar to 2020 – with the public sector continuing to show restraint but the private sector keen to attract key talent. Latest survey responses also reveal challenges for smaller organisations in attracting the level of director talent they need, given their inability to match the fees offered by larger companies.

There had also been a clear shift from organisations purchasing individual surveys to actively seeking StrategicPay’s recommendations. “We have been running our directors’ fee survey for 29 years, and we have seen far more engagement with boards keen to display good governance so they use us for independent advice.”

To access the free Pay at the Top 2021 booklet, go to www.strategicpay.co.nz.

Michelle Read

Strategic Pay Southern consulting manager Michelle Read is an experienced reward specialist who aims to make all things about remuneration and performance development easy for management teams and boards. Through an extensive career with multinationals in human resource leadership roles, her work has spanned different legislative frameworks and countries.

Cathy Hendry

Strategic Pay managing director Cathy Hendry has over 15 years’ remuneration consulting experience. For the past four years Hendry has successfully set up and run Strategic Pay’s Tauranga office, resulting in significant growth in Tauranga and the Bay of Plenty region. A recent focus of her work has been pay equity, where she has chaired the internal committee and led client assignments in this area. She was also a member of the group that presented to the parliamentary select committee on the draft legislation.