Fat CatAn article on the NZ Farmer website about Fonterra revealing that its boss, Theo Spierings, gets an $8.3 m pay package is below.

Most of these people get what they get because they are at the top of a pyramid with the front line workers forming the bottom levels; and the bigger the pyramid, usually the more the man (and it’s nearly always a man) at the top gets.

Mr Spierings get paid nearly 20 times what a High Court judge gets ($434,000), and the theory behind that level is they won’t be tempted by bribes, or at least not much.

Mr Spierings gets 277 times the average income of someone in Waikanae.

Otago University professor Dr Helen Roberts says there has been a rapidly growing divide between the average income of New Zealanders and that of chief executives over the last 20 years.

Do these bosses need to get such obscene amounts?  No.  As Don Brash pointed out on Newshub (TV3), there is what is called the Law of Diminishing Marginal Utility.  This basically says that more pay someone gets, the increasingly more of an increase they need for it to make a difference to them. And, of course, that works in reverse.

So this notion that such payments are needed is bunkum.

In Kapiti it doesn’t matter how awful a boss like Dougherty is, the councilors think that they need to pay enormous amounts to him to be “competitive” with what equivalent persons in other areas get.  No, they don’t.

The difference with a boss like Spierings of course, is that he is at the top of a business that needs to keep customers satisfied or they may go elsewhere, but regardless, most of what he and those like him decide to do isn’t rocket science, just common sense, provided research is good.

With businesses, provided they are in a competitive and level playing field situation, these enormous payments are at the expense of the shareholders, not the taxpaying public.  But how many of NZ’s mega businesses aren’t cosy little cartels effectively controlled by oligarchies?

NZ First leader Winston Peters says the payments to Fonterra chief executive Theo Spierings show why there needs to be a “say-on-pay” law, which would give shareholders the right to hold executives to account.

However Strategic Pay chief executive John McGill, who analyses executive pay, said his pay needed to be compared with compensation for overseas CEOs because there was no other company in New Zealand as big as Fonterra.

“Is this corporate New Zealand? Fat cat payouts for doing their day job,” Peters said in a statement.

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