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Nadine Higgins: No justification for huge CEO pay increases

Author
Nadine Higgins,
Publish Date
Mon, 24 Apr 2017, 7:56AM

Nadine Higgins: No justification for huge CEO pay increases

Author
Nadine Higgins,
Publish Date
Mon, 24 Apr 2017, 7:56AM

There is a fascinating piece in this week’s Listener magazine about CEO pay. It details research that's tracked what’s happened to CEO pay relative to workers' pay over an 18 year period. Back in 1997, CEOs earned 11 times what the average worker earned. By 2015 that multiple had blown out to 19 times. In fact the researcher says her findings are probably rather conservative.

But conservatively, workers average wages have gone up 91 percent over the 18 years of the study, while CEO pay has gone up 228 percent.

At some companies, the CEO now earns 60 times what the average worker does.

Obviously big CEO salaries always garner big headlines and that’s not always fair. There’s no doubt if you’re managing a multi million or billion dollar company you should be paid a lot more than someone flipping the burgers or cleaning the toilets. You’ve had to work your way up, you probably spent a lot of time and money on higher education and you have a lot of responsibility on your shoulders.

But I cannot see any justification for that gap getting exponentially largely. None. From all the studies I’ve looked at, there isn’t any. Some research has found CEO pay increases had no correlation to growth in the size of their company. International research suggests the highest performing CEOs were often the worst performing. We’re always being told about market relativity for CEO pay, but I reckon it’s high time there is some relativity to what their workers are paid.

The Listener approached 12 CEOs and asked them about their pay and its relationship to workers pay - and only 3 actually answered the questions. That speaks volumes. If they have a reasonable defence as to why the gap keeps getting wider - then let’s hear it!

At a time when inequality is getting worse, a light needs to be shone on the growing disparity and the reasons for it. You can't scoff at a low paid worker wanting a few extra cents and brush a CEO's double digit payrise under the carpet.

Just this weekend fast food workers at Restaurant Brands went on strike after their request for a pay rise of just 10 cents a hour each year for three years, was rejected. 10 measly cents! This is a company that made $26 million last year. By my back of the envelope calculations, with about 3,000 staff in New Zealand, the pay increase would cost them a little over $600,000 a year. That’s only a little over half the million dollar bonus they paid to their CEO last year. Their annual report says their staff are fundamental to the success of the company, so let's see them prove it.

This isn’t about the politics of envy. If a CEO does well and grows the company, I believe they deserve to be rewarded. But it’s about sharing the spoils - they didn’t achieve that on their own. When the company is doing well, the people who work there and contributed to that success deserve a share of the spoils too, just like CEOs do. And when times are tough CEOs need to share in the pain, just like workers do.

Air NZ did it last year - when they reported a record profit all staff got a $2500 bonus. Everyone. And that is how is should be.

Nadine Higgins is in hosting 'Early Edition' for Rachel Smalley.

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