27 Aug 2009

Pruning of top pay packets urged

11:12 pm on 27 August 2009

There are calls for the pay of top executives to be pruned.

The $5 million that Telecom chief executive Paul Reynolds was paid last year has prompted criticism from some quarters.

Others with large packages are Fonterra chief executive Andrew Ferrier, who earns almost $4 million and Air New Zealand chief executive Rob Fyfe, believed to earn more than $2 million.

Earlier this year, Mr Fyfe took a 20% pay cut as global markets deteriorated.

A former chief executive of the Institute of Management, David Chapman, says some top pay packets are obscene and there are cases where pay has risen, despite a falling share price.

He says research in the United States in 2006 found no connection between high executive pay and company performance. Instead, it showed that fat pay packets were often related to a falling share price.

Mr Chapman says it is time company boards took on top executives over their salaries and made efforts to prune them.

Contact Energy learned the hard way not to risk the wrath of the public over pay issues - it lost 40,0000 customers when it tried to double the salaries for directors.