How did TVNZ star salaries get so stratospherically high? And, given that the number earning over $100,000 has risen 25 percent under the Clark government, where's the evidence of a rollback? by Gordon Campbell
Fallout is still being felt at TVNZ from the reigning culture there during the 1990s. Listener enquiries indicate, for instance, that TVNZ did not re-register under the Companies Act 1993 for three years, until 1996. Obviously, TVNZ's current chief executive Ian Fraser was not at the helm in those days - but does he have any comment?
"I haven't any idea at all why it wasn't done," Fraser replies. "I agree with you, it seems extraordinary. My understanding is that, if you don't register, you are liable. I find [it] bizarre, to be frank ... [But] if the result of it is a retrospective action against TVNZ to fine us for four years of default, I'll throttle you." Further enquiries with company secretary Noel Vautier, however, let TVNZ off the hook on this one. A window for compliance existed - and Treasury, not TVNZ, Vautier says, was responsible for handling the preparation, signing and filing of the necessary documentation. "We had no input into that timing."
Unfortunately, that Treasury timetable has had one lingering downside. To comply with the Companies Act, TVNZ must list the numbers of its employees earning over $100,000, counted in bands of $10,000. Because it did not re-register until 1996, the breakdowns for the preceding years do not appear to exist. "I confirm," Vautier says, "that the information you refer to is not available for the years 1993, 1994 and 1995."
As a result, no one can isolate the exact point when the salaries for presenters and top executives at TVNZ began to head into the stratosphere. By comparison, the mini-furore over the credit-card expenditure of TVNZ news and current affairs boss Bill Ralston is a political sideshow - for the taxpayer, the big-ticket expenses continue to flow from the culture of top-tier remuneration that got cemented into place at TVNZ during the 1990s, for reasons and by means still only dimly understood.
What we can know is this: TVNZ entered the brave new world of commercial broadcasting in 1989. In 1990, news presenters Richard Long and Judy Bailey were reported as receiving $65,000 a year, and $80,000 a year respectively. By 1994, the Paul Holmes TVNZ/RNZ joint deal was being reported as worth around $250,000. Two years later, when daylight first dawned on this subject in the 1996 annual report, there is one employee - widely assumed to be Holmes - earning between $710,000 and $720,000, while another employee - again, widely assumed to be the then-chief executive Chris Anderson - earned between $420,000 and $430,000. The elevator was up and running.
Tidy sums. Yet, by 2001, the top earner had only inched forward - to between $750,000 and $760,000. By then, however, executive salaries were coming under scrutiny in select committees, notably by Labour MP Clayton Cosgrove. On October 31, 2001, Cosgrove twice grilled TVNZ's then-CEO Rick Ellis about the huge movement that had taken place in the second-highest income bracket of $720,000 to $730,000 - "speculated to be yours", Cosgrove said - which had seen a 30 percent increase in one year. How could such a hike be justified? Ellis replied only with virtual non sequiturs, citing the reasons (inflation, etc) that were lifting salaries in general over $100,000, without addressing the specific example raised by Cosgrove. As a footnote to this abortive exchange, the 2002 annual report noted a payment to a former employee (widely assumed to be Ellis) of $850,000 to $880,000.
The point being: the salaries paid to top presenters at TVNZ have come under fire from all quarters in recent years, most notably from then-TVNZ board chairman Ross Armstrong. Certainly, presenter salaries did rise sharply during the 1990s, despite the fact that New Zealand's television "market" for their wares has only two major players. Far less attention has been paid to the interplay between presenter salaries and top executive salaries.
At the very least, according to TVNZ sources, the presenter salaries served to validate the pay rises that were taking place concurrently among the executives. Around the world, this was a period when massive pay packets were almost de rigueur, serving as self-validating symbols of potency for the senior executive class. Although neither simple nor direct, a linkage does seem to have existed. After all, TVNZ itself told Parliament in 2001 (see supplementary question 10, TVNZ Financial Review 1999/2000) that "internal relativity" was one of the main factors guiding how the company's Remuneration Committee did its job.
In sum, TVNZ had once seen it as reasonable to reward the likes of CEO Anderson with a salary package of between $360,000 to $370,000 - yet, within six years, select committee scrutiny was signalling that a salary/bonus package of nearly double that amount existed at the top executive level. During the 1990s, it should be recalled, TVNZ had sharply reduced its inhouse production capability and related staff. By default, a higher ratio of its top executives thus became located within its commissioning and programming staff - who belong to an exceedingly small pool in New Zealand, with few alternative places to take their expertise. Given that TV3's salaries were not publicly disclosed (then or now), this underlines the question - what salary benchmarks could TVNZ have possibly been using to set its remuneration levels within the television "market" of the day?
The rewards have not solely been accruing to those at the pinnacle of the TVNZ mountain. As media commentator Tom Frewen pointed out last November, the number of TVNZ employees earning over $100,000 has risen from 124 four years ago to 161 this year - over 10 percent of the entire workforce, and a rise of 25 percent during the term of a Clark government that came into office intensely critical of TVNZ remuneration levels, and pledging to demand more efficiency from the state broadcaster.
In the existing climate, being praised by Fraser is no guarantee of longevity. In November 2002, Fraser emailed the Assignment staff in glowing terms about their fishing-industry probe. "It was bold, it was brave, it was ... totally absorbing television. It was Assignment at its best, well-researched, defined and direct." Despite scheduling problems, Fraser added, the audience had arrived en masse. "The fact that, despite the relatively complex nature of the story, they stayed and stayed, speaks volumes." Major inquiries into the fishing industry had followed in the programme's wake and, all in all, Fraser declared himself "proud to instance the success of the Assignment special at every opportunity".
Within eight months, Assignment had been axed - and to me, Fraser was unrepentant. "I don't have a problem about the removal of Assignment, because I think that a lot of the debate about Assignment is about nostalgia, and about the ideal, rather than what was actually put to air. I watched Assignment on a regular, regular basis and was almost as regularly disappointed. Assignment became an icon of the kind of programme it should have been, but wasn't."
To many, the folding of Assignment into the Sunday programme and the shedding of many of its senior staff were budgetary decisions as much as verdicts on quality. Looking back two or three years, does Fraser think that TVNZ staffing and resource levels in news and current affairs were inflated compared to those of TV3? "I had that prejudice." A prejudice, rather than a rational assessment? A prejudice, Fraser explains, partly because the deeper he dug, the harder it became to get accurate details on what TV3 was spending. "But I certainly had the sense that our fixed costs were significantly higher than theirs."
So, that perception drove the cutbacks sought by TVNZ news and current affairs chief Bill Ralston? "No, sought by me." That project, he continues, had to begin by properly analysing "for the first time" just what amounts the news department was spending and on what. Hitherto, hard to pinpoint. "[We] were having to pull together disparate figures under disparate headings from all sorts of different budgetary centres." That being so, would there be an argument for specifying the news and current affairs budgets in the TVNZ annual report? "There might be," Fraser replies laconically, "if we were not simultaneously running a commercial operation."
So, Assignment has been merged with Sunday - which, the night before our interview, had consisted of a crime story from Australia, a Pacific Island preacher having a spot of biffo with his congregation in Christchurch and a racing item featuring Steel Balls the gambler. Does such a line-up meet the standard in news and current affairs that Fraser is looking for? "It does for that programme." Within two months, however, Fraser adds, TVNZ will be unveiling a new show in what is currently the Monday Documentary New Zealand slot. The working title is One News Special, and the new show will rotate between four different formats: studio debate, town-hall meetings, a citizens' jury format and "a hard-edged, field-produced current affairs documentary, [that is] not magazine style".
Meanwhile, the drive to lower fixed costs at TVNZ continues apace. As mentioned, TVNZ has (at various times since 2000) sought a rollback in presenters' salaries. However, this quest for moderation has been led by executives sitting on salary whoopee cushions that those same presenters had helped to inflate for them. Where is the evidence of a rollback in executive salaries? "Well," Fraser says, "I doubt whether you'd find any evidence of any substantial rollback in executive salaries."
Shouldn't there be one? "That argument is entirely based," Fraser replies, "on an internal relativity being sought, and I cannot be certain of that at all." But in 2001, I point out, TVNZ told Parliament that internal relativity was a factor in setting salaries. "Well, okay, I just can't comment intelligently on it. What I can say is that from my point of view, I don't think that salary settings, even with an idiosyncratic organisation [such as TVNZ] should be a branch of poetry." In order to put more science and less poetry into the process, he explains, TVNZ has been engaged "over the last year or 18 months" in a rigorous review of its salary-setting procedures. No, this process is not being led by the Remuneration Committee of the TVNZ board - a team of consultants, he says, has been brought in to do the job.
Problem is, similar promises have been made before. In 2001, TVNZ promised Parliament that its salary-setting process had become "steadily more focused and robust over the past two years, and TVNZ is working now on detail which will allow the remuneration model to be entirely transparent to staff and employees by March 2002". Even now, isn't his current team extracting efficiencies mainly from those earning below $100,000 - even though the salaries of some executives leading this charge could easily pay for three or four foot soldiers working below the $100,000 threshold? "I think that's pretty gross," Fraser says. "The kind of efficiencies that I was looking for last year in news and current affairs were not about driving down the wages and conditions of the foot soldiers." News and current affairs spend millions of dollars, he says, and most of the efficiencies being sought were in overheads.
As for the bigger picture ... "There was the move that began under Ross Armstrong to reduce some of the presenter salaries. That was a move that achieved some success. Whether that was a move that was appropriate across the board at TVNZ, I can only gauge by looking at the evaluation data that I get." To him, that suggests TVNZ exists in a marketplace far wider than TV3, Prime or Sky.
Given the inexorable rise in salaries above $100,000, has there been a comparable rise in salaries below $100,000? "Yeah, I think there has been ... Again, I'm not completely on top of this game, Gordon, but ... Yes, yeah, I am saying that." Interesting, given the perception that some top salaries have been increasing by 10, 20 and 30 percent, which has not been occurring for those earning below $100,000. "That's not true, either," Fraser maintains. Every year, he goes through the abstracts of what the company intends to do with salaries. "And I have signed off some very, very significant increases [for those earning below $100,000] of 20, 25, 30 percent."
Despite Fraser's best efforts, current events do seem to be conspiring against him. At the time of writing, he was still days away from re-testifying before the Commerce select committee that has been pressing TVNZ to release details of its credit-card expenditure, particularly by Ralston; information that TVNZ had been withholding on grounds of commercial sensitivity. Ultimately, even though Ralston's expenditure may have been within company guidelines, the state broadcaster may have some trouble convincing the public about the adequacy of those guidelines. A price limit of $60 for a bottle of wine for entertaining clients - and $15 a bottle for staff functions - may not sound like much of a discipline to the denizens of talkback radio.
Sometimes, the cure can be as bad as the disease. Back on July 5, 2000, National MP Katherine Rich had acidly reminded the government about its pledges to improve the "inadequate governance procedures" that had resulted in remuneration packages at TVNZ that were "out of kilter with public expectations". In reply, the then-Broadcasting Minister Marian Hobbs offered what now seems a fairly hilarious solution - the fix-it man on "appropriate payments" at TVNZ, she triumphantly announced, would be its new chairman, Dr Ross Armstrong.