08 February 2013

The remuneration whoopee cushion

Last year I mentioned in two posts the culture of extravagance that arose in TVNZ as it shifted from a public service broadcaster to one focused almost solely on ratings and advertising sales. In January, in a piece on excessive local authority CEO salaries, I argued that the model for paying 'the talent', i.e. TV presenters, had become entirely severed from reality. In TVNZ's case it took a major public outcry, and presumably overt or covert political pressure, to reign in the excessive and lavish salaries offered to the public face of the network:

This reliance on a faulty market model was perfectly exemplified in the state broadcaster TVNZ, which became so fixated on the importance of retaining broadcaster Paul Holmes that his salary package skyrocketed to unfathomable and politically unsustainable levels. The Herald reported in 2009 that back in the days when newsreader Judy Bailey commanded an $800,000 salary, which brought about a public outcry, money was apparently no object
In the Bailey era, Paul Holmes was earning around $700,000 for his 7pm Holmes show on TVNZ, while an attempt to cut Susan Wood's $450,000 salary by $100,000 resulted in her leaving the broadcaster. 
A world in which Susan Wood was worth $450,000 is clearly not one I'm familiar with. What was the upshot of these huge pay packets? The state broadcaster eventually called the talent's bluff. Holmes and Bailey were set loose, and while Bailey chose to retire gracefully, Holmes was given the chance to see if his 'market value' was actually worth the amount he was being paid, and it turned out it wasn't. (He went back to his highly successful radio career and eventually returned to TVNZ, presumably on a much smaller salary).
Then in October I mentioned in passing that if contemporary TVNZ bosses really wanted to save a bit of money while at the same time bolster their journalistic reputation, they might consider repurposing the nearly $1.3 million it spent on hair, makeup and outfits and instead use the money to hire up to 14 graduate journalists. A flippant suggestion, certainly, but one that speaks to the priorities of the state broadcaster.

Earlier this week commentator Gordon Campbell illustrated the point I was trying to make in January 2012. In discussing the flurry of media commentary on the death of broadcaster Paul Holmes, he delves into the history and culture of TVNZ in the Wild West days of the 1990s when taxpayers' money was seemingly flung around with gay abandon and salaries soared to insultingly high levels:

Worldwide, the 1990s was a decade when massive pay packets became self-validating symbols of potency for the senior executive class. Unfortunately, and due in part to a Treasury bungle, TVNZ failed to re-register under the Companies Act 1993 for the period 1994 and 1995 – and it thus failed to deliver annual reports and specify the income bands for its top earners during those years. As a consequence, we lack precise evidence for the period when the income of TVNZ’s top presenters began to interact with the pay packets of TVNZ’s executives, and started to boost them skywards. I wrote an article about this in 2004, but since it’s now behind a paywall, I’ll briefly summarise the contents. 
What we know is that at the outset of the 1990s, newsreaders Richard Long and Judy Bailey were reportedly on incomes of $65,000 and $80,000 respectively. By 1993, Paul Holmes’ TVNZ/RNZ deal was reportedly worth $250,000. Two years later, when TVNZ’s annual report once again saw daylight, there was one individual – believed to be Holmes – on $720,000. The escalator on executive salaries had also begun running. Another individual – believed to be then-CEO Chris Anderson was on the $420,000 to $430,000 band. 
By 2001, the top salary had only inched forward to $750-760,000 – but that second placed earner (who in parliamentary hearings that year was alleged to be then-CEO Rick Ellis) was now earning between $720-730,000, and this topped out a year with a parting payment to someone (again, assumed to be Ellis) of between $850,000 to $880,000. 
This ratcheting effect cannot be blamed on Paul Holmes. It was not his fault that the huge leaps in his own remuneration during the 1990s got used as a whoopee cushion for the top executives who employed him, to validate their own leaps in pay. We are however, still living with the effects of that era of vanity and excess, and it has been cemented in place as the norm.
A timely reminder that when public money is being spent, serious questions always need to be asked whenever anyone asserts that 'market forces' demand exorbitant remuneration packages. Just remember what happened to Holmes and Susan Wood and remind big-noter celebs and CEOs alike that employers and, ultimately, taxpayers, may well call your bluff. Because sometimes when the 'pay peanuts, get monkeys' argument is deployed, the hairy simians look like a real bargain compared to what's on offer. 
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