The Prime Minister’s flip-flop on whether he will continue to claim a $52,000 accommodation allowance for living in the Wellington apartment he owns is important.
Parliament has enacted a safety net of minimum employment entitlements for New Zealanders, such as a minimum wage and entitlements to paid leave such as annual leave, sick leave and parental leave. For good reasons, the power of setting the pay of key public office holders is given to an independent body, the Remuneration Authority, which sets an annual salary for our Prime Minister, Ministers and MPs and certain other roles.
The Prime Minister plays on his background in big business; former CEO roles, business mergers and acquisitions - and so on. He is used to negotiating his own salary and terms and conditions of employment. While there is no doubt that the role of Prime Minister is a huge and difficult job, it comes with a salary of $471,000 plus certain other allowances and benefits. Mr Luxon took a big pay cut when he opted out of the private sector and took on a career of public service.
One of the most popular moves the Ardern lead government made was to freeze the pay of politicians back in 2018. The pay freeze is due to end this year, and a new review by the Remuneration Authority for setting politicians’ pay may mean that MPs get a huge increase to make up for six years of standing still. The outcome of the review may be contentious, particularly as the cost-of-living crisis continues for many New Zealanders.
Chief Executive roles are essentially about providing leadership and strategic direction to an organisation. Leadership is often seen to have an expectation to model behaviours that an organisation strives for. High profile companies and their leaders often face scrutiny by the public and their shareholders.
Mr Luxon’s, successor at Air New Zealand, Greg Foran, offered to reduce his base pay of $1.65 million by approximately 15 per cent ($250,000) at an early stage in the Covid pandemic as he led his team through the huge changes, including voluntary and involuntary redundancies, that were necessary at the time.
Last year, Air New Zealand’s competitor Qantas, experienced shockwaves when it was accused of allegedly selling tickets to flights that had already been cancelled over a three-month period in 2022. Late last year, it’s then CEO Alan Joyce, brought forward his retirement but he is still reported to have been paid over $20 million for his final year.
Fletcher Building Chief Executive Ross Taylor recently announced he was stepping down as he delivered news that the company had made a net loss of $120 million in the first half of its current financial year and downgraded its earnings guidance for the full year. The Board chair Bruce Hassall also resigned.
In the United States, Tesla was taken to task by a shareholder in the State of Delaware where the company is incorporated. In January 2024 the Judge decided to void the pay package that the Board awarded Elon Musk and helped him make the world’s richest person by ordering Tesla to cancel stock options worth about $US50 billion awarded to him as its Chief Executive Officer.
In January 2024 Stats NZ advised that the Consumers Price Index increased 4.7 percent in the 12 months to the December 2023 quarter and that the cost of living for the average New Zealand household increased 7.0 percent in the 12 months to the December 2023 quarter. Yet the new government which sets New Zealander’s employment safety net recently announced that the minimum wage will increase by only 2 percent, from $22.70 to $23.15, from 1 April 2024.
The housing allowance available to MPs is to assist those based outside of Wellington to find accommodation in the capital. Few prime Ministers have claimed it, with Mr Luxon being the first in at least 34 years. He is one of New Zealand’s wealthiest Prime Ministers, he told journalists “It’s an entitlement and I’m well within the rules,”. “I’m entitled to the entitlements that everyone else has.”
Mr Luxon has now said that he will not claim the allowance and will repay the allowance he has already been paid. Under the law, we should all know our rights. That is different from doing what is right. Read more...