SSC Reply To Scoop Questions On Higher Salaries

Thursday, 3 November 2005, 10:55 am
Article: Kevin List

SSC Reply To Scoop Questions On Higher Salaries

Taking his hands off the tiller of the ship of state (briefly) the State Service Commissioner Mark Prebble answered Scoop's written questions regarding the topical subject of higher salaries for Public Service chief executives.

Who sets the salaries of Public Service chief executives?

Part three of the SSC Annual Report deals with The Remuneration of State Sector Employees. In Section One Mr Prebble explains that "The State Sector Commissioner has a role in setting and reviewing the remuneration of 32 Public Service chief executives."

Question: Who else besides Mr Prebble has a role in setting the remuneration of Public Service chief executives?

Mark Prebble's reply: The State Services Commissioner is responsible for the remuneration of the 32 Public Service chief executives whose departments are defined under the State Sector Act 1988. I set and review their remuneration within a policy approved by the Government.

The remuneration policy is designed to:
- link Public Service chief executive remuneration to a comparator market of the wider public sector (eg Crown entities, Crown companies, State-owned enterprises, and local government); and

- strengthen the link between chief executives' performance and their remuneration.

On appointment of a new chief executive, I negotiate remuneration, and other terms and conditions, with the appointee. Under section 38 of the Act, I must obtain the agreement of the Prime Minister and the Minister of State Services before finalising the conditions of employment, including remuneration.

For each Public Service chief executive in place, I have the discretion to adjust their remuneration annually and to pay an annual performance incentive, of up to 15 percent of remuneration, where I determine it to be justified.

Remuneration is an issue that I consider very seriously. As I said in my first Annual Report as State Services Commissioner (2004) "I am mindful that most of these chief executives are being paid sums that are higher than most New Zealanders receive, although well short of the topmost salaries in the private sector. I am also well aware of public interest in chief executive remuneration. I believe that taxpayers expect a conservative approach to Public Service salaries, but that most New Zealanders would expect to have highly competent people leading the organisations that deliver public services."

Who Sets Remuneration for the Crown Law Office GCSB and SSC?

Noting that The State Service Commissioner does not set the remuneration for the chief executives of three departments - The State Services Commission, The Crown Law Office and the GCSB -

Question: Who does set these chief executives remuneration and is it, (their pay) benchmarked against the other 32 chief executives Mr Prebble does have a hand in setting?

Mark Prebble's reply: The Remuneration Authority (formerly the Higher Salaries Commission) is part of the Department of Labour. It is responsible for determining the salaries paid to Members of Parliament, the Judiciary and some senior public sector positions (including mine). I am unable to comment on their benchmarking practice.

Is there a high turnover of chief executives?

Mr Prebble notes on page 103 of the SSC Report notes that he has been able to "meet the policy in the very smallest Public Service chief executive roles." The impact of not meeting the "policy" leads Mr Prebble to "believe" he will be unable to attract and retain highly competent Public Service chief executives.

Question: On what basis other than 'belief' does Mr Prebble consider he will be unable to attract and retain competent chief executives - Is there any data showing a high turnover of chief executives or an inability of certain roles to be filled? If so is it in the report anywhere? If this data isn't in the report , why not?

Mark Prebble's reply: For several years the SSC documented a trend that shows not enough fully prepared or diverse candidates applying for chief executive and other senior leadership positions, ie in filling vacancies there is only a limited pool of potential candidates (one or two) suitable for a chief executive role rather than a desired talent pool of several people. For several positions New Zealand had to appoint candidates from offshore. SSC's previous Annual Reports and other publications have documented this issue.

For example: "The new strategy for developing Public Service leaders is intended to improve the supply of talented and suitably experienced senior executives committed to a career at the highest levels of the New Zealand Public Service. Only time will tell whether or not this commitment is enough to encourage these people to compete for the most demanding jobs in the Public Service, and continue to do so at discounted rates of remuneration." (Michael Wintringham, previous State Services Commissioner, commenting in the SSC Annual Report 2003).

And from the State Services Commission's 2002 Briefing to the Incoming Government (available on www.ssc.govt.nz):

"Competitive remuneration is an issue In the meantime, I will have to look beyond the Public Service, and beyond New Zealand, for suitable candidates for some chief executive positions. In the last two years, I have appointed three chief executives from Australia.

This has put some strain on the remuneration regime, through higher salary expectations and more costly superannuation arrangements. The current chief executive remuneration policy has been in place since 1997. I have applied it conservatively.

This reflects the Government's preference and my own assessment of the contentious nature of Public Service remuneration.

I will continue to apply the policy conservatively but, until I start seeing the results from new investment in senior leadership and management development, there may be occasions where I have to pay a premium to attract the best candidate for some positions." (Michael Wintringham, then State Services Commissioner, 2002)

Question: How many chief executives in the last three financial years have retired from their jobs or left for other careers?

Mark Prebble's reply: Five Public Service chief executives left their positions in 2002/03 (three retired and two resigned)

- Seven chief executives left their positions in the 2003/04 year (three resigned, two retired, one deceased and one position was disestablished)

- Three chief executive left their positions during 2004/05 (two retired, one position was disestablished - however this person was appointed to another chief executive position)

Question: How many chief executive vacancies have been unable to be filled in the last three financial years?

Mark Prebble's reply:None. Although some positions required several months to fill.

Question: How many appointments were made offshore in the last three financial years of Public Service chief executives?

Mark Prebble's reply:One Australian (Dr John Glaister) and one Canadian (Paula Tyler) were appointed in the last three years.

* Two New Zealanders who were working offshore (Barry Matthews and Penny Carnaby) were also appointed during this time.

ENDS

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