SSC – how much are our senior bureaucrats really worth?

The fallout over Roger Sutton’s resignation and State Services Commissioner Iain Rennie’s handling of it raises issues beyond inappropriate behaviour and its sterilisation by the old boys network. The golden handshakes available to those at the top of the government department/quango/SOE food chain, on top of their excessively high salaries, and the very different treatment meted out to those lower down, suggests many at the top of the Public Service have lost touch with what those two words mean. Into the same box I would also put the salaries of many local government executives.

I am no fan of the current Prime Minister, or the previous one for that matter, but the office of Prime Minister is surely the most demanding in government in terms of both time, responsibility and family sacrifice. Why then are many senior Heads of Department, DHB and SOE executives paid far more than the PM (including inexplicably the Head of the Prime Minister’s own department)? It’s time to ignore the self serving “meritocracy” delusions of the corporate HR elite and cap all public sector pay at a rate less than the PM. Perhaps a Cabinet Minister’s salary could be used as a guide.

In the context of salary and scope of his organisation’s role, Sutton’s reported $560,000 pa was not as egregious as some. His salary is only marginally higher than the PM’s. But is there no one as “competent” as Sutton prepared to do as good if not better job, for far less? Is talent in CERA, in Christchurch, in New Zealand of such paucity that this person cannot be found? Does the head of ACC or the Chancellor of Auckland University really need to earn well over $600,000? Whatever your view of Len Brown, why does the CEO of Auckland City earn more than double the Mayor? Ditto Auckland Transport. Waterfront Auckland. Watercare.  These aren’t competitive public companies. They are monopoly utilities. The Chairman of Waterfront Auckland said in The NZ Herald

“This is the real world,” said Sir Bob, saying Mr Dalzell could walk out the door tomorrow and get double or treble his salary.

Like many others, I say let him. No organisation is dependent on its CEO. If they can get a better paying job in New Zealand or overseas in the private sector (doubtful) then they should go for it. Someone just as competent if not more so will step up and do the same job for a lot less.

Study after study has found no correlation between remuneration, performance and satisfaction. So why the high salaries? Simply, it is because most CEO’s come from a small self reinforcing elite supported by a cult of HR. Bench marking they call it. No one is going to break ranks and suggest they are all too highly paid. That would be career suicide. If stupid shareholders want to let boards overpay executives of public companies, then so be it. Recent history is littered with executives raping their own organisations and walking away as it crashes, or even worse, taking a giant golden handshake to leave.

Government entities, be they bureaucracies, SOE’s or quangos should be bench marked to politicians. They are both ostensibly involved in public service and in the “employee” of the taxpayer. Who cares what bureaucrats (or politicians) could “potentially” get in the private sector! The talent pool is large enough to promote from within at reasonable rates, and with the expectation that a public service culture is maintained. No one is indispensable. That is a myth.

The public sector has been over corporatised and infected by delusional ethos inimical to both fairness and value for money for the tax/rate payer. There is no evidence that paying more attracts better performing CEO’s in either the private or public sector. Contrary to the tenets of neoliberal ideology, and the best efforts of its proponents, most people do not want to act purely in their own self interest. The best results come from an engaged and collaborative workplace, paid fairly but not where the disparity between those at the top and the average employee is excessive. Iain Rennie has the perfect opportunity with the appointment of a new CERA CEO, to signal a change in direction for public service salaries. Who knows, he might be pleasantly surprised.


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