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The Forum > Article Comments > Heads I win: tails you lose > Comments

Heads I win: tails you lose : Comments

By John Shields, published 21/3/2006

Looking after Number One: the state of pay for Australian executives.

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Good on them for getting into the position to control their own destiny.

Many wish they could, and because they cant they like to be preoccupied with pulling the big guys down.

They are the most important members of their team. You pay peanuts you get monkeys.

I hope it continues, if you dont like it i suggest you ignore it.
Posted by Realist, Tuesday, 21 March 2006 10:24:20 AM
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Hi John,

This is a particularly enlightening article. Well researched and well presented...nice to see the hypocrisy in one of our least effectively performing sectors exposed for what it is.

What is good for the goose is clearly NOT good in their eyes for the gander.

It is interesting to note the information you have presented here in relation to an article presented in the Australian newspaper some time ago that stated that the failure rate for Corporate executives in Australia was a whopping 29%...how uncompetitive is that?

They need a strong dose of their own medicine and fast!

National Competition Policy and deregulation of all else Australian - Primary Industries, Banks, Airlines, Workers Rights...you name it they have demanded that every sector of middle and lower wage earners or small business be dragged down closer towards the 3rd world...but they remain in their ivory towers - grasping for more and more of the available pie. Where is their justification?

The real agenda is clear when Macquarie Bank announced the next step of the agenda...they will buy out cotton farmers in NSW and lease them back to the farmers. With Macquarie Banks record this is the Corporate equivalent of Communist China or Russia's implementation of property takeover after WW2 in East Germany.

Australians must relinquish their land to the "State" - or in this case the Corporates have taken the place of the "State"...wake up Australia!

Let's see these guys accepting the CEO wage packages of these 'competitor' nations...like Brazil who is exporting over $70 Million to us more than we export to them...clearly a reasonable request considering their own demands.

Keep up the great work John!
Posted by Meg1, Tuesday, 21 March 2006 10:35:02 AM
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If the market is prepared to pay these amounts I don't have too many problems here. However, what is particularly galling is when our treasurer confidently tells us all with his characteristic grin that real wages have grown by 14 percent during his tenure without spelling out the fact that these figures include the massive growth in earnings of the top few percent. Highlight this fact and the earnings growth of the majority is far more ordinary.
Posted by crocodile, Tuesday, 21 March 2006 11:28:16 AM
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My chosen name describes them all.

Nice article John.
Posted by Narcissist, Tuesday, 21 March 2006 11:28:56 AM
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Nice piece. We need to be reminded of these facts every now and then, even though there is very little that anyone can do about it.

Their situation is highly analogous to politicians, who traditionally have awarded themselves pay and perks above and beyond that which any normal worker can aspire to. It would be interesting to see a similar study made of this group - not just their base salaries, but all the expenses, allowances and perks of office (quick trip to the UK? Is it Wimbledon? OK then) that they acquire along the way.

They continue to be rewarded even after they are fired by their disillusioned constituents or retire in office. Their superannuation entitlements are staggering, and a bunch of them get free travel - even international flights - for the rest of their natural.

Doesn't seem to be much to pick between the two lots really. You can be an utter disaster as the leader of a political party and still walk away with enough in your kick not to have to work ever again. Just as you can be an utter disaster as a CEO and live comfortably on your “entitlements”.

The reason is pretty straightforward in both cases. They each have the power to award themselves monetary and other rewards without sufficient checks and balances. Shareholder activity is increasingly managed by pension funds, whose approach is "don't rock the boat, you never know when you'll be in that position". You have to stand together, after all.

On the political front, the various pre-selection routines ensure that we, the voters, remain unrepresented by the politician that we send off to parliament.

The factions, who are after all in the patronage business pure and simple, ensure that one of their own is put in front of us, depriving us of the opportunity to elect (don't laugh) an honest politician.

Is there anything we can do about it? Not really. But as Realist would say, you can always become one of them if you want to.

If you want to sell your soul, that is.
Posted by Pericles, Tuesday, 21 March 2006 4:00:54 PM
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Realist,

You pay peanuts , you get monkeys - You pay big bucks , you get gorillas, big ugly greedy gorillas!
Posted by Coyote, Tuesday, 21 March 2006 5:04:19 PM
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Many of these points are valid, particularly:
"Many company boards behave more like executive accomplices than as independent guardians of shareholder interest";
"....the underlying problem is that of boardroom timidity and complicity".
See my presentation to GMAA on "Subversion of Boards by Management" --reported by Crikey:
http://www.crikey.com.au///business/2002/12/03-history.print.html
Jeff Schubert
www.jeffschubert.com
Email: schubert@jeffschubert.com
Book "Dictatorial CEOs & their Lieutenants: the cases of Napoleon, Hitler, Stalin, Mussolini, Ataturk and Mao" is forthcoming.
Posted by Jeff Schubert, Tuesday, 21 March 2006 7:50:22 PM
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I would like to take you back in time. Say to the middle ages, when a man fortunate enough to have been born into the right family had all the perks and benefits. The serfs and commoners served the King.

The people at the top of the food chain always take care of themselves and the commoners fight for crumbs. Bitter, no I'm not bitter, just a human with a little historical perspective. Nothing much has changed, we're still fighting over peanuts and resenting the elite in power.

The Holy War continues.
Posted by Patty Jr. Satanic Feminist, Wednesday, 22 March 2006 10:05:07 AM
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Patty Jr.
Yours is not a negative view, it is a realistic one. Why would someone living on $30,000 per annum trying to feed, clothe and educate 3 children have anything else but cynicism for an exceutive who is paid 30 times what he earns, for doing little more than allocating work to others? An executive is also an employee of a company whose remuneration puts cost pressures on the company's wages budget.

It would seem that the company will pay any amount to executives, however to the people who actually "produce" the company's product, the "workers" the company desperately needs to "cut wages" most workers see this as double standards, and know they are already being paid too little. Today's SMH, shows only 16% of workers see themselves as being paid properly, this being the case a backlash may well result against this weeks introduction of Nochoice legislation.
Posted by SHONGA, Wednesday, 22 March 2006 12:18:10 PM
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Warren Buffett is the second richest person in the US (after Bill Gates). He is chairman of Berkshire Hathaway and pays himself a salary of $100,000 a year. He is certainly not, in Coyote's terminology, a monkey. (The vast bulk of his wealth is in Berkshire Hathaway shares.)

In his recent annual letter to shareholders, http://www.berkshirehathaway.com/letters/2005ltr.pdf he wrote:

"Too often, executive compensation in the U.S. is ridiculously out of line with performance. That won’t change, moreover, because the deck is stacked against investors when it comes to the CEO’s pay. The upshot is that a mediocre-or-worse CEO – aided by his handpicked VP of human relations and a consultant from the ever-accommodating firm of Ratchet, Ratchet and Bingo – all too often receives gobs of money from an ill-designed compensation arrangement."

He goes on to describe some of the ways that executives game the system.

Princeton economist and NYTimes columnist Paul Krugman pointed out in a column on March 13 that in the US from 1979 to 2003, the share of income received by the top 10% of taxpayers rose from 33% to 44%. But:

"... most of the gain went to a very small elite. The income share of the top 1 percent went from 9.6 to 17.5 percent, accounting for more than 70 percent of the top decile’s gain. The income share of the top 0.25 percent went from 4.9 to 10.5, accounting for a bit more than half the total gain...

"Does talking about the reality that a very small elite has gotten the lion’s share of the gains sound too, um, shrill?"

Median income has not increased in the US in real terms for the past decade. The benefit of productivity growth is going exclusively to the obscenely rich. This is the direction in which Australia is heading too.
Posted by MikeM, Thursday, 23 March 2006 6:21:26 PM
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Mike M
And so say all of us....
Posted by SHONGA, Friday, 24 March 2006 8:19:44 AM
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The American notion that CEOs need to be paid tens of millions of dollars to peform, is a myth, it also contravenes most peoples sense of fairness and justice.

If we look at it globally, American car company executives have been paid megadollars, compared to say Japanese company executives, or Korean shipyard CEOs. Yet Toyota is thriving and booming, whilst
both GM and Ford are on the ropes, not far from going broke. Korean shipyards are running rings around others from other parts of the world. All this achieved without megadollar pay for the tops.

If we look at the Australian scene, again there is no clear connection between high pay and performance. There are more things that drive people, then just money. Ego for instance, passion etc.

At the end of the day, CEOs are employees, risking none of their own capital, just their time and reputation. The trick is to find good ones, no matter what their level of remunaration
Posted by Yabby, Saturday, 25 March 2006 2:30:01 PM
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Yabby,
Mate good to see we are not alone in advocating some common sense, do you believe we can get beyond National Competition Policy, and move to National Effenciency and Excellence Policy? It would be exciting to think that we could!
Posted by SHONGA, Saturday, 25 March 2006 3:30:15 PM
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Shonga, alot of companies that have done well in Australia, have done so because they are pseudo monopolies. Their CEOs then try to claim compensation, because of that fact. Why did the AMP for instance pay Trumball what it did, when it did? What did he do to deserve it?

I believe that alot more thought needs to be given as to how we select aptitude and talent. I once had a girlfriend who was a professor of ENT surgery, who trained young surgeons. I asked her how they selected who would be trained, out of the many applications.
It really came down to a committee sitting around a table, everyone giving their 5c worth. The net result was that some people with little natural aptitude in hand-eye coordination, ie using a scalpel, got through the system. They also landed up being not very good surgeons, which doesent really help the patients.

IMHO within most companies there are probably extremely talented people, who would make great leaders. We just need to find better ways to identify them, rather then the present methods. Most of those people would naturally thrive on being CEO, without tens of millions of $ required to motivate them.
Posted by Yabby, Saturday, 25 March 2006 9:17:23 PM
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Yabby, I couldn't agree more mate, I long for the day when National Competition Policy is out, and National Excellence and Effincy Policy is in, which is what we need.

C.E.O.'s are overpaid employees, who could not possibly earn $67,000 per week. Good to see your informed comments mate, all the best to you.
Regards, Shaun.
Posted by SHONGA, Saturday, 25 March 2006 9:26:23 PM
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In the mid-70s the oil-shock rocked the car industry. Mazda who had just released rotary engine cars (smooth running but fuel-hungry) were particularly badly hit. As they restructured and re-designed their cars Mazda management took pay cuts but left worker's wages alone. But then their CEO had risen through the ranks from the shop floor and understood that the real source of wealth for the company was its workers not its management. Unfortunately the dingbats running most of Australia's top companies actually think they are important and worth the $$$ they get paid.

In the 1990s the Karpin Report highlighted the second-rate nature of Australia's business managers - and nothing has changed; they're still second rate - its just we pay them more.
Posted by bondi_tram, Monday, 27 March 2006 11:26:27 AM
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The CEOs deservr all they can get. I mean who else could have thought out the situation where if you make a purchase on a credit card say a single purchase that was worth $400.00 and nothing else, but meanwhile you get a statement that shows that $400.00 owing,then you have that money refunded into the account for whatever reason by the vendor, (in other words you no longer have the dept in the credit card) you still have to pay $400.00 into your account? Otherwise they charge you interest on the full amount. Later if you then try to get the money back as your credit card is now in dbit to you, if you take $400.00 out they consider that as a cash withdrawal and charge interest accordingly.

How's that for ingenuity ? I say give them all they deserve
Posted by The Cid, Wednesday, 12 July 2006 5:15:29 PM
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The Cid,
I agree give them exactly what they deserve in the 1970's they recieved 4 times the average weekly male earning, today it has risen to 60 times the average weekly male earnings, with a c.e.o. last week recieving a mere 66% pay increase that took him up to approximately $3.5 mil p.a.

I say draw them all up an AWA which gives them 4 times the average weekly male earnings again, just imagine how Australian labour costs would fall, being of course a great benefit to this great nation.
Posted by SHONGA, Wednesday, 12 July 2006 5:42:41 PM
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