Have they earned it?

Today The New Zealand Herald released its annual survey of the salaries of CEOs of New Zealand companies and NZ-listed divisions of foreign companies. If we want to understand the root cause of New Zealand’s rising inequality, that list is Exhibit A.

The Herald found that last year NZ CEOs saw their average pay increase by 10% at a time when the average increase for ordinary workers was 3%, with many workers gleeful at receiving a 1% increase, and plenty of others, particularly at the lower end of the pay scale, receiving no increase at all.

Apologists for this discrepancy always say that part of the pay that a CEO receives is usually tied to performance of the company. Yet ordinary workers seldom get such “performance incentives”, as if the CEO single-handedly increased profits without any help at all from the lowest paid workers.

And the gap between the top and bottom is staggering. New Zealand recently had a protracted and public battle over Zero Hour Contracts, in which workers are contractually bound to be available for full-time hours, but they are guaranteed none. When they have no hours, they have no pay, and they can’t get a second job for when their main job gives them no hours without risking being fired.

The battle against Zero Hour Contracts in the fast food industry was won because of the organising of the Unite Union and the publicity of the now-defunct Campbell Live public affairs programme on TV3. It seems highly unlikely that the fast food industry would have abandoned Zero Hour Contracts without all that pressure.

Which is why this is so galling: in 2014, Restaurant Brands’ CEO was paid $700,000. That works out to about $336 an hour for a 40-hour week. Many of the lowest paid workers are Restaurant Brands will be paid minimum wage, and that amount depends on their age and whether they’re just starting out in work. But let’s take the highest rate: The current adult minimum wage (before tax) for employees aged 16 or over are is $14.75 per hour (for US readers, today that works out to US$ 10.285 per hour, but this is a case when the exchange rate isn’t really relevant). So, the CEO of Restaurant Brands, while his company was fighting to keep Zero Hour Contracts, was being paid nearly twenty-three times what the lowest paid worker was getting. That’s telling.

Whenever the impact of the huge gap between the top and the bottom is raised, the top earners and their allies in the National/Act Party always accuse critics of engaging in “class warfare”, which is ironic: There is class warfare going on, but it’s the top few percent waging economic war against everyone else.

Even so, as the NZ Labour Party’s Finance Spokesperson, Grant Robertson, said, “No one begrudges people who do difficult, complex and time consuming jobs being paid a decent salary, but salaries and salary increases for Chief Executives have now reached absurd levels.” And that’s exactly it: It’s not that they’re paid a lot, it’s the fact they’re paid an absurdly high amount when compared to ordinary workers.

“These CEO pay figures show how normalised such extreme inequality has become. It shouldn’t be like this,” the NZ Green Party’s industrial relations spokesperson Denise Roche said. “Pay rates for ordinary workers have not kept up with productivity increases in recent years, which means workers aren’t getting fairly rewarded for the wealth they help to create.”

Council of Trade Unions secretary Sam Huggard explained why that matters: “Low wages in New Zealand is a huge part of the story of inequality. The excessive gap between ordinary workers and those at the very top of the economic pile is making things worse.”

“When the economy isn’t working for everyone, it isn’t working at all,” the Greens’ Roche said. Labour’s Robertson said, “When the CEO of a major bank earns 120 times that of the lowest level employee there is something very wrong and very unfair.”

How do we fix it? The Greens are repeating their call that publicly listed companies be legally required to report the ratio between their highest and lowest paid workers, which is one measure of whether a CEO’s pay is obscene or not.

Labour’s Robertson suggested some more of what’s needed:

“It’s high time to think about some measures to manage this widening gap. We need to raise the incomes of all New Zealanders. We need more transparency around pay setting for Chief Executives, and a role for shareholders and workers in how that pay is set. There is also reason to investigate other options, including whether a legislated limit for the ratio of CEO to worker pay is required, as was proposed in Switzerland.

“Fundamentally dealing with inequality in New Zealand means lifting wages and investing in creating higher paying jobs. But it also means ensuring that the benefits of work and a growing economy are fairly shared. That’s the Kiwi way, and we should not lose sight of the values that have helped define our nation.”

This year’s list includes 11 CEOs paid $2 million or more, the highest number since the paper started the survey a decade ago. Unless I missed it, I didn’t see any women listed among the top-paid CEOs in New Zealand.

Personally, I don’t believe that high salaries paid to CEOs can be justified on any level—certainly not morally, but also not ethically or even economically—when there’s such a huge gap between the top and the bottom. The lowest paid workers spend a far higher percentage of their incomes than do the rich, so a company paying its lowest workers badly and its highest paid obscenely, is being self-defeating—and pretty stupid.

We need to re-balance this particular ledger sheet so that everyone—those at the top and the much larger number of workers who helped them get there—can share in the benefits of a growing economy. Just don’t expect to see anything done about it any time soon.