Minister mulls law change to curb state sector bosses’ pay

State Services Minister Chris Hipkins is considering legislation to curb the “high pay levels” of some state sector chief executives.  

“Crown entities need to be more accountable and transparent when awarding their chief executives pay raises that go against the advice of the minister and the state services commissioner,” he said in a statement this morning.

This follows a report into senior pay rates by the State Services Commission, which shows the average pay increase for Crown entity chief executives was almost double that of other state sector bosses.

The average remuneration increase for public service chief executives in the 2016/17 year, for example, was 2.0%. Tertiary education institution and district health board chief executives got a 2.7% bump and the average salary increase for public service staff was 2.2%

The average increase for Crown entity chief executives was 4.1%, the report shows.

It also reveals that for the first time, the commissioner has identified Crown entity boards that chose not to follow the commission’s advice and gave remuneration increases above-recommended levels.

This includes Guardians of NZ Superannuation, ACC and the certifier of quality, environmental, food and occupational health and safety management systems, Telarc.

Meanwhile, State Services Commissioner Peter Hughes has issued a stern warning to directors who fail to heed his advice.

“Crown entities who choose not to follow State Services Commission advice with respect to the chief executives’ remuneration are now identified in this report. This information can inform ministers’ decisions about the tenure of board members.”

In February, NZ Super’s board approved a 36% pay raise for its chief executive Adrian Orr despite the government recommending a 2.5% pay rise.

Mr Orr ended up receiving a 23.4% increase, taking his taxable income to $1.03 million and earning him the mantle of New Zealand’s highest-paid public servant.

At the time, then prime minister Bill English said some public sector boards were “a bit overenthusiastic about what their chief executives should be paid.”  

He hinted his government was thinking about changes to the salary review process for some of New Zealand’s biggest government organisations, such as ACC, the Reserve Bank, Housing NZ and the Super Fund.

Mr Hipkins says it’s time to “tighten the reins.”

“Crown entities need to be more accountable and transparent when awarding their chief executives pay rises that go against the advice of the minister and the state services commissioner."

He says it’s appropriate to have a look at what can be done to put the brakes on escalating salaries.

“I have asked the commissioner for advice and regulatory options, particularly on how we could change the Crown Entities Act.”