Give shareholders the real power to cut bosses’ pay
A couple of years ago I received a furious telephone call from the chief executive officer of one of our biggest companies complaining about what he regarded as the ungrateful and insulting tone of The Daily Telegraph’s coverage of executive salaries.
The bloke had a bit of a point because, as he pointed out, his salary was extravagant on paper but had coincided with an unprecedented period of increased returns to shareholders. He’d also resisted the slash-and-burn approach to running his business, shielding workers from dismissal when it would have been the easiest way to achieve short-term savings in what was then a looming economic downturn.
The point I tried to make in the media’s defence was that rather than accusing us of being cheap populists, he should really convene a telephone hook-up with his fellow CEOs and ask them if their remuneration fell into the same category as his.
That is – did it reflect the continuing growth in the share price? The happiness and stability of the company’s workforce? The company’s performance against its competitors?
The many CEOs who continue to enjoy payrises despite failing to meet any of the above criteria should form their own little support group. Frankly, they’re the biggest sooks in the land, whacking on about the sacrifices they make, the pressures they’re under, the risks they take, the opportunities they create for other workers. And all the while ignoring the fact that each week they’re making enough coin to buy a two-bedroom house in Ashfield, Kew or Prospect while their staff fret about whether they’ll even have a job at all in a year’s time.
I’m sure that Geoff Dixon was spitting his cornflakes across the room this morning when he saw that he’d been sliced and diced in The Daily Telegraph, The Sydney Morning Herald and every other newspaper over the genuinely astounding revelation that he was pocketing half a million bucks a week as Qantas was sliding into the mire.
Dixon’s $510,000 a week was an extraordinary return given that he’d already indicated he was quitting as CEO anyway, worked less than half the financial year, and left the flying kangaroo in an unprecedented position of staring down a possible loss for the first time in its history.
Obviously, aviation has gone through massive upheavals – increased competition, surging fuel costs, terrorism and, domestically, the rise in value of the Australian dollar – and all those pressures presented Dixon with challenges the airline had not faced before.
But none of that changes the fact that the return to Qantas shareholders had plummeted, thousands of Qantas workers lost their jobs, and the remainder were terrified at the prospect of losing theirs. The airline also endured a string of safety scares which jarred with its reputation for being the most bankable carrier going around.
The more fundamental point – and it’s probably a moral point – is how much money does one bloke need anyway?
Like most people if I ended up with a sudden windfall of $510,000 I’d feel almost set for life – you’d pay off the house and car, knock the top of a Crownie and go and sit in the backyard with a broad grin on your face.
If Dixon wants to examine the broader context of his shaming in this morning’s newspapers, he should shift his eyes from his big run on page two and look at a couple of other stories in the paper.
Such as the brief on page 5 saying that 40 per cent of Australian workers have had their hours cut this past year because of the GFC. Or the other small story just above it, saying that thousands of families are enduring their own tax time hell because the Federal Government is so hopeless that it’s been accidentally overpaying them the family tax benefit, and now wants the money back.
The obscene levels of dosh which these blokes receive suggest they’ve completely lost sight of the true value of anything. No wonder they are so quick to lapse into indignation at the treatment they receive as they have wholly removed themselves from normal human behaviour.
The question – what do you do about all this? – troubled the Howard Government and is now also an issue for the Rudd Government.
With his pontificating on “extreme capitalism” in outings such as his Monthly essay, Kevin Rudd has created an expectation that, as a prime minister who abhors the greed-is-good culture, he’s actually going to take these blokes on.
It would be misguided if he did.
Obscene as these salaries can be, the last thing Australia wants is some kind of Soviet-style legislated or mandated salary structure for the private sector.
The reality is that, at the very top end of business, a smaller-sized nation such as Australia is competing with much more powerful capitalist nations such as the US, and in Europe, and if we try to control the amount of money CEOs can take home, we’ll end up hiring the world’s duds.
In a capitalist system such as ours the power to monitor and act on upper management salaries should rest with shareholders alone.
Perhaps there should be a tripwire clause whereby CEOs can be compelled to hand back some of their salary – or most of their salary – if they fail to meet the criteria set out above.
If it’s good enough for every other worker in the land to satisfy productivity criteria before becoming eligible for a modest annual increase, the same enterprise bargaining principles should apply to the big end of town.
In the meantime they should spare us all their whingeing and take their complaints up with each other, as they’re only getting the publicity they deserve.
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