Sir John Key says 15 per cent pay cut too low for Fletcher executives to take

Friday, 3 April 2020

Former prime minister Sir John Key says businesses like Fletcher Building should be concerned about their reputation when proposing restructures.

On Wednesday Fletcher Building gave staff 24-hours notice to accept a pay proposal that would see salaries slash by up to 70 per cent in the weeks after the lockdown.

Meanwhile, senior executives including chief executive Ross Taylor, whose salary including benefits was $5.3 million last year, would take a 15 per cent pay cut over three months.

Sir John key says normally executives take a bigger cut than 15 per cent when trouble hits.

Key said normally executives would take a bigger cut than 15 per cent.

'Something all companies need to think about is that reputation really matters,' Key said.

* Fletcher proposes 'massive' pay cuts in 12-week plan

* Coronavirus: Fletcher Building staff pay uncertain**

Fletcher Building reported a profit after tax of $164 million for the year ending June 2019.

The country's largest construction company has 12 senior executives. Earlier this week Xero chief executive Steve Vamos resigned from Fletcher Building's board.

Key said Fletcher Building should have applied 'the front page of the paper test' to think about how its announcements would be perceived.

'Everyone out there should think in an environment where anxiety is going to go up and scrutiny of decisions is going to go up.

'I don't know all the rationale Ross Taylor and the team went through but they still need to think about how that's perceived,' Key said.

A number of Fletcher Building staff and contractors told Stuff they felt pressured into accepting the deal, but others said they appreciated the efforts to company had gone to to keep paying them while they weren't working.

A Fletcher Building spokeswoman said those executives working during the lockdown would receive a 15 per cent pay cut while executives not working would be on the 12 week pay plan along with everyone else.

'Everyone still working their usual hours over the lockdown, apart from senior executives working their normal hours, will continue to receive 100 per cent of their normal base pay.

Fletcher Building reported an annual profit after-tax of $164 million for the year ending June 2019.

'Despite the short timeframe, the vast majority of people understand the unprecedented situation we are in and have confirmed their support for the proposal, the spokeswoman said.

'We are continuing to work through discussions with a small number of remaining individuals and are aiming to conclude as quickly as possible.

'Those senior leaders working through the lockdown are managing the business through a uniquely challenging period and ensuring we are prepared for when the re-start process begins,' she said.

According to its plan, starting next week, non-working staff currently on special leave earning full pay would receive 65 per cent of their salaries until April 22.

After this, staff pay would decrease to 50 per cent of base pay for a month, and 30 per cent of their income for the following month.

Fletcher Building said the two weeks of full pay on special leave and the two weeks of 65 per cent pay averaged to 80 per cent over the entire month, the spokewoman said.

Under the wage subsidy scheme, which Fletcher Building has applied for, employers must use its best endeavours to pay workers at least 80 per cent of their usual pay, or the subsidy amount.

Any change in pay must be in consultation with, and the agreement of, staff.

Amalgamated Workers Union national secretary Maurice Davis said Fletcher Building's senior leaders were 'out of touch' with their workforce.

'A lot of goodwill has been lost over they way they've handled this. It's disappointing to see,' Davis said.

'Fletcher's executives have a sense of entitlement thinking it's okay to be taking a 15 per cent pay cut on six figure salaries.'

Davis said he had been in talks with leaders of other companies that had taken pay cuts of up to 50 per cent to save their businesses from the economic impact of the coronavirus.

On Friday SkyCity announced 200 staff would lose their jobs as it faced revenue losses of $90m per month.

Its chief executive Graeme Stephens along with executives reporting directly to him would be taking a 40 per cent cut to their salaries for the remainder of the 2020 financial year to June 30.