IMHO: Remuneration in reality

OPINION: Over the years I have been frustrated at the way wage increases have been negotiated. I spent many years whilst at the New Zealand Shareholders' Association recommending to chairpersons, directors and senior executives they should move away from increasing wages and salaries using percentages rather than a dollar figure.

Of course they were against this as they prefer to go for, say, a 10% increase than a dollar number.

As an example, to tell shareholders and employees that the CEO increase went from $1,000,000 to $1,100,000 would look bad when the average employee received a pay increase of $2,000. Saying 10% does not draw the same attention.

In my opinion, this has been the major cause of why the gap between the average employee and those at the top has widened over the years. It  has had little or no relevance to productivity.

Also, when a cost of living increase is announced it should be the same dollar figure for everyone.

As an example, if the average wage is say $60,000 and the increase comes to $1,800 or 3% why should a CEO on say $1,000,000 get $30,000?

When reviewing all fees, salaries etc, I strongly recommend only showing dollar figures, not percentages. It will slow down the gap between those at the top and the average employee.

Then you will be unlikely to see such large pay increases being handed out unless it can be shown it can be justified as the result of exceptional performance.

The views expressed in this article are the author’s own and do not reflect the position of the IoD unless explicitly stated.

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