Why the anger about executive salaries? Sure, that question might seem just a little naive. (“Multimillionaires, the long-term unemployed – why can’t we all just get along?”)
After all, even as companies are moulting employees like dog hair, the upwards pressure doesn’t seem to have gone off exorbitant executive pay, at least from the perspective of Joe Mortgage-Stressed. The economy isn’t technically in a recession, but it’s quite ill – perhaps the oligarchs could ease off the foie gras and Dom Perignon?
So ACTU head Sharan Burrow proclaimed last Tuesday that now is the time to crack down on CEO remuneration, and proposed a salary cap for chief executives of 10 times the wage of their average employee. Normally such a proposal would be easy to dismiss as the embarrassing post-mortem spasm of a union movement that is cooling in the morgue. A financial crisis is as good a time as any to whip up a little anger about dastardly bosses; a bit of traditional class conflict.
But Prime Minister Kevin Rudd has been threatening to curb CEO remuneration since early this year, asking the Productivity Commission to inquire into the best approach to take. The inquiry has spent the past few months hearing a wide range of people who are fairly sure they know how to run Australia’s biggest companies better than they are being run now.
I’m somewhat cynical about handing authority over corporate salaries to politicians who have, in recent times, had temper tantrums about inflight food, got into fisticuffs in party-room meetings and resigned over conflicts of interest. The corporate world might be cut-throat, but Parliament is full of people who hate each other. Their moral authority is less than absolute. And their knowledge of how large companies operate is less than comprehensive.
Shareholders – who directly own Australia’s biggest companies – should perhaps turn a more sceptical eye to the salaries of the executives. After all, they have just as big an interest in the future of their company as its employees.
While the market is climbing, as it has for a decade, executive salaries climb. And when the market falls, many executive salaries fall. The Australian Institute of Company Directors has reported that the directors of big financial firms like Commonwealth Bank, AMP, ANZ and AXA Asia Pacific have had their salaries frozen, restructured, or cut in response to the downturn. Average bonus payouts on Wall Street fell by 40 per cent in 2008. Perhaps they could have fallen more.
Future corporate remuneration committees will be rethinking the salary packages that have led to some executives getting huge bonuses even as their company collapses around them.
But, still, the best people to deal with these issues are the owners of firms, not politicians.
Anyway, who seriously believes that the level of CEO pay in Australia had anything to do with the subprime crisis that set off this whole mess? It is really easy and popular to throw abuse at CEOs.
I’m not trying to suggest that executives pulling in $30 million a year are in any way underdogs. But you’d hardly call it courageous when politicians and union leaders blame the three or four Australian executives who could be considered uber-rich for the problems the world economy faces.
So when Sharan Burrow stood up last week to proclaim that “the shameful reality is that not only have there been no apologies and no jail sentences but outrageous multimillion bonuses”, she was actually telling the rest of Australia two things: 1. We should all work really hard to keep the union movement from being in any position to alter the Crimes Act; and 2. the nation’s most senior union official doesn’t know how to respond to the economic downturn with anything other than angry finger-pointing.
And when Rudd decided that this was the time to crack down on corporate compensation, he revealed his crude populism – the Government seems just as eager to blame “greed” or executive salaries or “neo-liberals” for the crisis as it is to actually tackle the causes. You’d expect that from the unions, but you’d hope for better from the Prime Minister.