CEO Pay vs Returns
A pay-performance misalignment detector. Flags director-issuer pairs where total remuneration increased while the company underperformed the NZ50 benchmark. It is an analytical observation, not a judgement about any individual director.
Where you’ll see this label: /insights/pay-for-failure
What it measures
For each director-issuer pair with at least two consecutive years of disclosed remuneration data, we compute the year-over-year change in total remuneration and the year-over-year shareholder return relative to the NZ50 benchmark (alpha). When pay rises while alpha is negative, we flag the pair at one of three severity tiers.
The label is a data-driven pattern detector — it does not make a value judgement. Pay increases may be justified by changes in role, additional committee responsibilities, multi-year incentive vesting, sector-wide compensation cycles, or retention considerations. We surface the pattern; readers and the affected director are invited to add context via the right-of-reply form.
Inputs
- remuneration_historyNZX director-fee disclosures extracted from audited annual reports under Companies Act 1993 §211 and NZX Listing Rule 3.6. Required: 2+ consecutive years per director-issuer pair.
- stock_prices (issuer)Adjusted closing prices used to compute year-over-year total return for each issuer.
- stock_prices (NZ50 benchmark)NZ50 index prices used to compute the benchmark return; alpha = issuer return − benchmark return for the same period.
Algorithm
For each pair (director × issuer):
- Collect all years of disclosed total remuneration. Skip pairs with <2 years.
- For each pair of consecutive years, compute the percentage change in remuneration.
- Compute the issuer’s annual return for the same period; subtract the NZ50 return to get alpha.
- If pay change ≥ +5% AND alpha ≤ −5%, emit a flag at the appropriate severity tier (see below).
- Aggregate per director across companies and years. Directors with 2+ flagged years are surfaced as “repeat instances” for editorial visibility — repeat appearances may reflect industry-wide cycles, multi-year vesting, or sector underperformance, not individual conduct.
Source code: lib/payForFailure.ts
Tiers / scoring bands
- CriticalPay change ≥ +10% AND alpha ≤ −10%
- WarningPay change ≥ +10% AND alpha < 0%
- CautionPay change ≥ +5% AND alpha ≤ −5%
Limitations
These are the known limits of the methodology. We disclose them publicly so readers can weigh the observation in context, and so that any qualified-privilege defence under the Defamation Act 1992 §16(2) rests on demonstrably fair and accurate reporting.
- Director remuneration is set by board committees and may reflect multi-year contracts, retention payments, or LTI vesting unrelated to the fiscal year flagged.
- Negative alpha can be driven by sector-wide trends, macro conditions, or strategic investments (e.g. acquisitions, capex programmes) where short-term returns lag.
- Role changes (chair appointment, committee chair upgrades, new directorships) inflate year-over-year remuneration without indicating pay-for-failure.
- The NZ50 benchmark is broad-market — issuers in highly cyclical sectors may persistently underperform during downturns even with sound governance.
- We compare to the financial year of the disclosure; some pay components (cash bonus, share grants) reflect performance in a different period.
- Coverage requires 2+ years of disclosed remuneration. Newer directors, recent IPOs, or issuers with sparse disclosure history are under-represented.
Right of reply
Anyone named in connection with this label has a right of reply via the public dispute & right-of-reply form. Submissions go to our editorial review queue with a 5-business-day response target. We will publish your contextual statement alongside the data point or label it addresses. See Data Principles for the full corrections + removal policy.