The Dim-Post

March 27, 2012

Galtian overlord watch, nice work if you can get it edition

Filed under: economics — danylmc @ 11:51 am

From the Herald, yesterday:

Mighty River increased its chief executive’s pay by 34 per cent, or $450,000, to $1.8 million. Most of the increase resulted from the company meeting performance targets.

And now today . . .

Electricity generator and retailer Mighty River Power, which the Government intends to partially privatise later this year, reported a net profit of $17.6 million for the six months to December 31, down 81 per cent compared with the previous corresponding period.

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24 Comments »

  1. Can we get some other numbers regarding ratio of executive pay to net profit? I’m pretty sure 1:10 is phenomenal.

    Comment by Simon Poole — March 27, 2012 @ 12:15 pm

  2. Well just be thankful that Mighty River didn’t increase their profit from last year.
    Had they increased profit, which must be a Performance target, then the CEO would have been paid $2 – 3 million more.
    So lucky us!

    Comment by xianmac — March 27, 2012 @ 12:27 pm

  3. The ratio is 1-20. It is a six month profit figure and an annual salary figure.

    I guess the board just truly believed that the CEO they appointed and their approach was responsible for 5% of the organisation’s overall profit performance.

    We should really just trust the judgement of the board – after all they get paid tens of thousands a year to attend a handful of meetings and read some papers – the hourly rate for each one of them is probably well in excess of the CEO – so they must be adding even more value.

    Comment by Richard29 — March 27, 2012 @ 12:28 pm

  4. Goddamn bureaucrats, with their empire building, and their capturing.

    Comment by Pascal's bookie — March 27, 2012 @ 12:36 pm

  5. “Mrs Withers said the Company’s net profit after tax of $17.6 million was significantly lower than the prior comparable period (pcp) of $92.8 million, as a result of non-cash fair value movements recognised under NZ IFRS (International Financial Reporting Standards) during the half-year, largely due to the global fall in long-term wholesale interest rates.” (courtesy of MR Press Release, Scoop Business)

    So EBIT or RoE / RoA are probably a better measures.

    Interestingly, the FY1011 results show total employee pay + benefits @ $75m pa.
    Heffernan’s paycheck was $962k of that but his bonuses topped it up to $1.8m, 500k more than the FY before.

    Nice work if you can get it….

    Comment by Gregor W — March 27, 2012 @ 1:02 pm

  6. “I guess the board just truly believed that the CEO they appointed and their approach was responsible for 5% of the organisation’s overall profit performance.”

    Hopefully they think he’s responsible for more than his salary. Otherwise what’s the point of having him on staff?

    It seems slightly simplistic though to only look at a single year’s net profit (or loss), especially if the reason for the reduced profit is in expectation of much higher profits in years to come.

    Not that I’m trying to suggest it makes sense to pay so much. I think NZ isn’t so much a disgusting place to live compared with the rest of the world that it’s always necessary to try and match global market rates for CEOs, assuming that’s how this is being justified.

    Comment by izogi — March 27, 2012 @ 2:19 pm

  7. The ‘performance targets’ were to depress the profits so that the governments friends can buy Mighty River on the cheap.

    Then they’ll run the dams into disrepair and demand money from government and consumers to rebuild them – or replace them with polluting gas fired generators.

    Comment by Rich d'Rich (@rich_d_rich) — March 27, 2012 @ 2:28 pm

  8. I couldn’t say what this year’s performance targets are and maybe you’re right that they’re all about throwing money into the rivers to clog up their dams, but last year’s targets are listed on page 33 of the 2011 Annual Report. From that it looks like MRP failed its power plant reliability and market share targets, but ticked off everything else, and summed the whole thing up with some tidily swish photos of various managers and executives impressively standing with arms-folded.

    The greater issue is whether the targets were set usefully in the first place for a government-owned company and whether meeting the targets as written actually justified such a salary increase. Personally I’m not convinced, but whatever.

    Comment by izogi — March 27, 2012 @ 2:46 pm

  9. Rich #7 nails it again! Forget the CEO pay packet, this stunning drop in profits needs explanation. And a bit better than ‘lower interest rates’. Really? You mean MRP has so much of its funds in bonds (rather than tied up in hydro dams) that its profitability changes that dramatically?

    I smell pathetic fudging of true long-term profitability, allowing Nats to flog off MRP for a song. Followed by the asset strip, profit gouge, and renationalisation when knackered, ready for the cycle to start again.

    Comment by bob — March 27, 2012 @ 3:12 pm

  10. You mean MRP has so much of its funds in bonds (rather than tied up in hydro dams) that its profitability changes that dramatically?

    I suspect it’s more to do with currency hedging wrt MRP debt (issuing of long-term bonds to foreigners in order to to fund capital programmes) than fluctuation in some form MRP foreign equity warchest.

    It’s kind of hard to tell as the numbers are sliced and diced in all sorts of ways, but notably for the MRP group in FY2011….

    Cross currency interest rate derivatives – margin (11,604)
    Foreign exchange rate derivatives (38,990)

    Comment by Gregor W — March 27, 2012 @ 5:16 pm

  11. 1. You certainly do have a penchant for the word “edition” in a blog post title. When are the statists going to insist on a international blog post title standards committee and mandate a quota system on this word?

    2. Is “economics” the right tag for this post?

    Comment by ZenTiger — March 27, 2012 @ 5:56 pm

  12. “Is “economics” the right tag for this post?”

    I know! Why don’t you to explain why it’s not?

    Comment by Guy Smiley — March 27, 2012 @ 7:15 pm

  13. $1.8 mill? Pah, that’s nothing compared to what the fellow who copied an overseas auction website got for the sale of his copy. And we rely so much more on the uptime of that auction site, than any mere electrical generator that simply pumps out electricity. I mean, anyone can generate electricity and deliver it when it’s needed.

    Speaking of overloards (or ladies), how much does Helen earn? How much tax does she pay in NZ? Or anywhere? (You remeber her: the lady who didn’t notice how fast her car was going whilst travelling to a rugby match, name pronounced Hulun.)

    Comment by Clunking Fist — March 27, 2012 @ 7:26 pm

  14. Err.. what does Helen Clark’s salary or the tax she pays have to do with anything? As I understand it she’s currently working for the UN over in New York so you can stop having nightmares about your hard-earned tax dollars going towards her salary.

    Also for how long are we going to keep hearing about the whole speeding-to-the-rugby thing? You do realise that happened like 8 years ago, rite? Let it go.

    Comment by Rob — March 27, 2012 @ 7:37 pm

  15. -81% profits… man, there’s some targets I’m sure I could meet, and I’d do it for just half of his pay increase…

    Comment by Sam — March 27, 2012 @ 7:44 pm

  16. @Clunking Fist – are you trolling?

    Comment by nw — March 27, 2012 @ 7:53 pm

  17. It’s a good thing we installed a competent business manager as PM, because it is clearly excellent business sense to sell a profitable asset.

    Comment by alex — March 27, 2012 @ 8:37 pm

  18. thinking of wannabee overlord nats going ‘Galt’, when will ‘Crusher’ Collins be outed as the sender of that ACC data? Running roughshod is de rigeur for overlords but will it stymie her chances?

    Comment by not impressed — March 27, 2012 @ 8:48 pm

  19. @Guy: Because the expenditure doesn’t seem very, err, economical. Still, presuming the CEO pays taxes, perhaps the government is getting a good return on that score?

    Comment by ZenTiger — March 27, 2012 @ 9:47 pm

  20. “so you can stop having nightmares about your hard-earned tax dollars going towards her salary.”
    No, you’re right: once NZ starts paying money to the UN, then I should be worried.

    Comment by Clunking Fist — March 28, 2012 @ 1:15 pm

  21. @ Sam – nah, you’d never achieve that -81% profit result, mate. Funny thing about ordinary folks, most of us would bumble along and turn a modest profit…

    @ not impressed – Nat Radio asked Collins, and she said her dept had not leaked it. Very telling. Pity Mary Wilson didn’t follow up by asking ‘Did you leak Ms Pullar’s info, Minister?’ The only real question is – was Collins trying to knife down Nick Smith, or help him by putting the blowtorch on Ms Pullar?

    Comment by bob — March 28, 2012 @ 2:13 pm

  22. “most of us would bumble along and turn a modest profit…”

    Um, I would’t be too keen to buy electricty for my (imaginery) smelter if your business model was “bumble” since my pots have to run hot all the time or I’m poked..
    Some of the finance companies used the “bumble” model, and look at how that worked out (other’s used the “fuck’em” model, still others used the “pray for continuing property bubble” model and some used a mixture of these).

    Comment by Clunking Fist — March 28, 2012 @ 2:22 pm

  23. I saw that Judith Collins go through an amber light in her crown car – wish I’d got a photo, we could have blown it up as some kind of scandal. How come she didn’t wrench the wheel from the driver?

    Comment by Rich d'Rich (@rich_d_rich) — March 28, 2012 @ 8:31 pm

  24. These are the ethics of the multi-National 1% party and its supporters. I’m wondering why people allow National to get away with effectively stealing public assets and their future profits. The sense of entitlement emanating from that quarter can be detected at considerable distance.

    Comment by Steve (@nza1) — March 29, 2012 @ 9:28 am


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