Goff has a point

October 12th, 2012 at 11:00 am by David Farrar

Stuff reports:

Labour’s Phil Goff has attacked a big pay rise for the head of the Foreign Affairs ministry as a blatant double standard at a time when many diplomats are losing their jobs.

Figures on state sector chief executives’ pay released today showed boss ’s salary last year was the highest among chief executives, with a pay rise of $40,000 taking his package between $620,000 and $629,999.

I have no problem with Govt CEOs getting paid market rates, and getting pay rises when they perform well.

But the MFAT restructuring led by the CEO has been somewhat of a clusterfuck, and for the to give the CEO that presided over it a 7% or so payrise is going to go down badly with many. John Allen was an excellent CEO of NZ Post, and may well be doing many things well at MFAT – but the restructuring was a critical piece of work, and there was a near complete failure to get institutional support for it.

This is like the vexed issue of private sector CEOs pay. I don’t think most people are against CEOs getting huge salaries – so long as they and their companies are doing well. Few people ever would have claimed that Rob Fyfe didn’t add value to Air NZ well in excess of a million dollars. Steve Jobs was once valued by the market as being worth several billion to Apple, as that is how far their share price fell on news of his cancer.

But what annoys people is when a company is not performing, and the CEO gets a big pay increase and bonuses.

The figures, released by the State Services Commission also showed shamed former head of the Department of Building and Housing (DBH) Katrina Bach was paid out $81,105 in entitlements when she left the job earlier this year.

This one is a non-issue though. If someone is owed annual leave, they of course get it paid out when they leave. Surely there is no suggestion that the Government should break the law and not pay someone their legal entitlements.

Overall, the average increase in base salary for chief executives was 2.7 per cent. That compared with movement in average base salary across all public service staff of 3 per cent, Rennie said. …

One fifth of state sector bosses took an effective pay cut with either no change to their pay or a reduction.

2.7% overall is pretty modest. The only real issue is the big increase for MFAT CEO.

 

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15 Responses to “Goff has a point”

  1. Lee C (4,516 comments) says:

    Relax – the massive fiscal stimulus from teh recently reduced the youth minimum wage will pay for it anyway – what’s the big deal?

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  2. Redbaiter (9,123 comments) says:

    Fire all of these overpaid leeches.

    They are really one of NZ’s biggest problems.

    Its not a democracy anymore. These bureaucrats sit there and tell elected Ministers what should be done, and in most cases, the Ministers are so lame they are happy to be told.

    And of course all these over-paid parasites want to do is increase their allocation and grow their depts. Which means more tax (more stealing from the wealth producers) and more regulation. (more hobbling of the productive sector)

    I suspect that if Key let Tony Ryall off the leash he might put a few of these leeching petty tyrants in their place.

    Someone has to.

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  3. kowtow (8,524 comments) says:

    These senior civil servants are massively overpaid and the market rate excuse is bollox.
    Gone are the days of the loyal desk jockey quietly beavering away towards that reasonable pension and serving Joe Public at the same time.
    Now it’s the lie about international this that and the other.
    If they’re all so good why are the public sectors all over the western world so f#cked up.

    Bring back Sir Humphrey.

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  4. flipper (4,084 comments) says:

    But the main point is always avoided.
    Commercial organisations earn the dollars they pay staff.
    By and large Government owned entities do the same, albeit in a near (or actual) monopoly situtation.
    MFAT, SSC, Treasury et al DO NOT EARN THEIR INCOME. They pay their panty waists from monies expropriated from the taxpaying populace. So please, drop the bullshit about ” market rates”. ALSO drop bonuses. They are simply an unearned extra for “doing a job”.

    SSC rages are self determined because they simply suck on the public tit. Talk about breastfeeding in public. This is obscene.

    AND the same applies to the glorified clerks in Local Government.

    Time to limit all such salaries to a maximum tied to the Speaker of the HoR as in USA.

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  5. IHStewart (388 comments) says:

    ” But the MFAT restructuring led by the CEO has been somewhat of a clusterfuck ”

    Yeah but Murray McCully needs to be held accountable as well.

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  6. AJP (20 comments) says:

    David,
    I disagree with your assertion that John Allen stuffed up.
    The whole exercise turned into a “clusterf…” after McCully got involved, trying to score a few cheap political points after stuff got leaked to Phil Goff.
    He should have let his CEO get on with the job; instead he caved in because of some whinging public servants. Big mistake!
    If he had we, the public’ would have a lean and functioning MFAT.
    I therefore think that John Allen deserved his pay raise.

    Regards
    A long-time reader

    PS: I will not comment on Rob Fyfe but believe me your opinion differs a lot from the opinions of people working for the Airline.

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  7. somewhatthoughtful (466 comments) says:

    Hasn’t AirNZ’s share price plummeted under Fyfe?

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  8. KevinH (1,229 comments) says:

    Extremely poor timing for John Allen and MFAT. The restructuring now has no credibility.

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  9. CryHavoc (46 comments) says:

    @flipper: you are right that mfat doesn’t “earn” its money in the same way that a business does. Apart from being a spectacular banal point, it’s irrelevant. The question is what value does mfat return to tax payers? An obvious place to start looking for the answer would be at FTAs, then after that talking to the businesses who benefit from embassies’ interventions on their behalf to get better market access wherever they may be trying to trade.

    You could also look at the successful efforts of NZ diplomats to secure one of the largest claims to rights over our continental shelf, which could be worth literally billions of dollars to us, if the usual rent-a-crowd greenies would let us survey the resources there!

    The irony of your comment on this particular thread is that mfat is one of the few govt departments that adds considerable value to the NZ economy through these and other efforts.

    The other irony is that whenever individual diplomats are responsible for some advance that brings millions to an NZ business or industry, they rarely get rewarded financially themselves, which I know from personal experience!

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  10. georgebolwing (870 comments) says:

    Having worked in both the private and public sectors at senior levels, my experience is that setting salary rates is reasonably easy where the job can be scoped accurately and there is a thick market. So, to give an example, you can work out what the going rate for a junior office administrator reasonably easily and work out reasonably easily if they are doing a good job or not.

    The more specialised the job, then the harder it becomes, both because it gets harder to accurately specify the job requirements and the market gets thinner. In New Zealand, we only have one CEO of MFAT, and thus it is very hard to be be confident that you are setting the salary right.

    There is also a very disturbing tendency to use crude ‘before and after’ comparisions, like profitability went up, therefore good CEO, profitably went down, therefore bad CEO. The proper test is “with and without”: what would have the performance been without the particular person doing the job. For example, a CEO bought in to fix a failing business that did end up bankrupt might say, with some justification, “I was bought in to fix a dog, it was much worse than I thought and I haven’t been able to turn the company round, but without me, creditors would have gotten nothing, but at least they got 10 cents in the dollar and at least the staff got another six months employment”. This CEO might say “I should be paid a bonus because of the good job I did”. Likewise, a board might say to a CEO who saw profitability go up 50% that they are being sacked, because given the market conditions, a 100% increase was a reasonable performance and 50% is poor.

    Now, again, at senior levels in specialist jobs, a “with and without” test is hard to do, but it is the proper way to test someone’s actual performance.

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  11. Paulus (2,633 comments) says:

    It is all Key’s fault.

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  12. greenjacket (467 comments) says:

    AJP – do you know anything about what has been happening at Mfat?
    Are you aware how the restructuring proposed by ‘hoppy’ Allen would have resulted in cuts to the embassies in growth markets like China and ASEAN, while retaining embassies in places like Vienna, Stockholm and Warsaw – something that was contrary to the Minister’s desire to focus resources on growth markets in Asia.
    Are you aware how Allen’s lack of basic management skills has resulted in the trade negotiations team losing their best people (don’t you agree that any halfway decent CE knows they hold onto their best staff).
    Are you aware how Allen has overseen a blowout in consultants.
    Are you aware how relationships in Mfat between staff and a number of Allen’s senior managment team can be only be described as poisonous and that morale is rock bottom?
    Are you aware that when news got to Mfat that their beloved CEO had received a $40,000 pay increase when staff are having to apply for their old jobs at lower pay scales, there wasn’t exactly spontaneous celebrating by happy Mfaters along Lambton Quay.

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  13. Reid (16,521 comments) says:

    But the MFAT restructuring led by the CEO has been somewhat of a clusterfuck, and for the SSC to give the CEO that presided over it a 7% or so payrise is going to go down badly with many. John Allen was an excellent CEO of NZ Post, and may well be doing many things well at MFAT – but the restructuring was a critical piece of work, and there was a near complete failure to get institutional support for it.

    And @ greenjacket @ 2:55

    I worked at NZ Post when Allen was CEO and he was extremely well regarded by the employees. One of the legendary stories is that when they had a postal strike courtesy of the EPMU he walked through every floor of the Wgtn Head Office exhorting employees to drop everything and join him at the Petone mail processing centre to help sort mail. He was that sort of CEO. In addition he is one of the best communicators you have ever seen and his intellect is stellar. He dropped from a 1.2 million salary at post to go to MFAT. He is a people person personified and I would suspect his time at MFAT has changed him immeasurably and not for the better but not because of what he has done, but because of force majeur and this is to the detriment of NZ public service for Allen is one of, if not the, best we have. The following assessment is based on viewing him from afar, I have no relationship with him, he wouldn’t know me if I passed him on the street, this is just what I have observed.

    I believe he was almost certainly hand-picked by McCully for the role and I observe he dropped $400k to go there. Why? I assume because he thought he could make a difference for NZ Inc. He’s that sort of man.

    The thing he lacked at Post IMO was a Machiavellian nature, which McCully’s plan required. However such is just not a part of who he is.

    Any idiot should be able to see Allen was dropped in it by McCully. That was extraordinarily transparent from the way it played out. Why MFAT staff have turned against the messenger and refused to blame the person who wrote the message, is beyond me. Perhaps they should look again at whom is the real enemy.

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  14. Lucy (32 comments) says:

    John Allen is a great CEO and deserves every cent. I’m so pleased that MFAT has been cut back. They add the least value of any government department. When you are overseas and you see how much money these guys waste, especially the husbands and wives of the so-called diplomats – it just makes you sick.
    I really want someone in the media to really expose what is going on in there. To cut through the OIA stuff and the spin and reveal that they are pigs at the trough.

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  15. AJP (20 comments) says:

    Greenjacket.

    What John Allen was trying to do was to dismantle the “old boys club”.
    Also, I am not aware that Poland is a growing market for NZ.
    Never has been, never will be!

    And why do we need a Embassy in Sweden agin?

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