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The Forum > Article Comments > Overpaid and under performing > Comments

Overpaid and under performing : Comments

By Klaas Woldring, published 1/12/2008

Would a broad-based employee share ownership scheme curb excessive executive remuneration?

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I fail to understand how obscene executive incomes were ever allowed to exist. Why wasn’t this knocked on the head at least a couple of decades ago?

How can any shareholder not be grossly outraged by the head of their company drawing an income that is greater in twelve months than they’ll probably see cumulatively in their lifetime? The same question applies for any member of the community that has anything to do with any company with an overpaid top echelon…or any member of the community that believes in fair pay and a closing of the equity gap rather than a steady widening.

Surely shareholders can see that their CEOs and top executives are not a hundred or a thousand times smarter than themselves and are not doing a job that is a hundred or a thousand times more important. So how on earth can they condone rates of pay that suggest that the big-knobs are this much more intelligent and more important?

How can anyone condone a free-market system that so blatantly makes the very rich rapidly richer and the keeps the poor poor?

Why doesn’t the community demand that the government cap these rates of pay?

Why the hell hasn’t any government seen fit to do this anyway?

Oow…well of course the answer to the last question is that big biz rules, not governments.
Posted by Ludwig, Monday, 1 December 2008 9:46:16 AM
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Obscene executive incomes indeed.

Why allow in foreign executives when 100 Australians could be employed for the same total money to do the same job?.

$10 million divided by 100 is $100,000.Plenty to live on.
Posted by undidly, Monday, 1 December 2008 10:17:53 AM
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This is one of the reasons why I express the view that people ought consider not voting for either the liberal or labour party.

However, with the political donation rules as they are, conventional political wisdom no doubt suggests that it is beneficial to harvest donating fat cats, who are easier to control as individuals than a big group of "fair days pay for a fair days work" thinking people.

As one drunk plastic catholic said to me recently:
"the key to my success was to express in advance my personal desire to be an adherant, not an advocate."
Posted by DreamOn, Monday, 1 December 2008 2:24:12 PM
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We forget of course that executives are not employers, but honcho
employees, with their snouts closest to the company trough
and cheque book!

What eventuates is a human foible of always wanting more, no
matter what you pay them. Sad but true.
Posted by Yabby, Monday, 1 December 2008 2:25:29 PM
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The situation extends beyond the CEOs to the Boards and across industries. And there is an interlace between the two.

When Westpac was in trouble c. 1992, the ordinary shareholders moved a motion of no confidence against the the Sir Eric Neil led Board, the AMP Society which had a common director used the block of all the insurance, nominee and super funds under its control to defeat the gathered small shareholders. Soon after the Board was forced, yet there was clase each Board member received a pai out equal to all their emoluments received to date were they forced to retire. The payouts were in the millions. When John O'Neil ran the State Bank into debt, the Borad praised him and gave him huge pay raise.

In the early 1970s, when a school headmaster earned $8K pa and a bank manager of a sizeable branch $10K pa, Sir Robert Noman earned $100K. The CEO of a major bank now earn $20M pa. A branch manager does earn $2M pa nor a school headmaster $1.6M pa.

In the US, Citibank is receiving a USD $600M bailout, keeping the incompendents whom directed the sub-prime mortgage situation in a job.

Those with CBA super funds invested will have received a letter from the Bank stated its intention to back date unit prices in need (to protect the Bank). It will be interesting to test its duel pricing intentions against the TPA and the NSW Fair Trading Act (Sect 40, I think).

I think markrt forcess should be allowed to operate to clean away the existing organizations and their leaderships. Government should not be bailing-ou Banks, and the big salaried operators should go. In which case, (a) Asian overseas banks might take over ours', or (b) the Government does take control but to avoid socialism refloats the companies after three or four years. Shareholers will loose but that is their jeopardy for giving their voting who they did. It is the shareholder's right to loose for supporting the wrong board, who apppoint the wrong executives.
Posted by Oliver, Tuesday, 2 December 2008 10:53:58 AM
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A timely and interesting quote.

"I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country . . . corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed."

Abraham Lincoln
President of the United States, 1864
Posted by lorry, Tuesday, 2 December 2008 12:58:49 PM
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Don't see our senior executives doing this:

http://www.domain-b.com/companies/companies_u/UBS_Warburg/20081128_ubs_executives.html

Paying back there bonuses (UBS).

Actually, emplpoyees are at risk, if the economy worsens. Not just in the usual sense. Also, the Boards will sack long-term employees as Westpac did in the 1990s, to asset strip Superannuation Funds.
Posted by Oliver, Tuesday, 2 December 2008 12:59:22 PM
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Corporate owners and officers must be liable for all the harms they cause.

In 1886, the U.S. Supreme Court decided that a private corporation is a person and entitled to the legal rights and protections the Constitutions affords to any person. Because the Constitution makes no mention of corporations, it is a fairly clear case of the Court's taking it upon itself to rewrite the Constitution.
Far more remarkable, however, is that the doctrine of corporate personhood, which subsequently became a cornerstone of corporate law, was introduced into this 1886 decision without argument. According to the official case record, Supreme Court Justice Morrison Remick Waite simply pronounced before the beginning of argument in the case of Santa Clara County v. Southern Pacific Railroad Company http://www.ratical.com/corporations/SCvSPR1886.html that, “The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of opinion that it does.”
The court reporter duly entered into the summary record of the Court's findings that;
The defendant Corporations are persons within the intent of the clause in section one of the Fourteen Amendment (ensures slaves’ freedom after the civil war) to the Constitution of the United States, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws.

Thus it was that a two-sentence assertion by a single judge elevated corporations to the status of persons under the law, prepared the way for the rise of global corporate rule, and thereby changed the course of history.

This contradiction has not been directly addressed by the courts.

If the corporation powers are dubious, and remember, our Constitution is base on the US model. Does this mean the Australian corporation powers are based on false assumptions?

What a gross irony. That an amendment which was made to ensure people would have equal rights can be used to strip workers of right 150 years later.
Posted by lorry, Tuesday, 2 December 2008 1:56:35 PM
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Companies quoted on the stock exchanges of Australia and a lot more who are not, are all privately owned.

The owners of those companies are the share holders who “hold the shares”

Directors remuneration packages are determined by the board of directors.

The board of directors are appointed by the share holders.

It is no one else’s business, beyond those directors and shareholders how much any director, chief executive or ordinary staff member is paid.

I did note recently, Malcolm Turnbull was talking about making the decision on executive remuneration schemes more accountable to the share holders, through I presume a vote at the AGM.

This would probably be a good thing but let us not pretend, the ‘wealth’ of a business and its distribution thereof is anything but a private matter.

Being the private matter for the share holders of the business, it ceases to be something which is up for common gossip among politicians, political lobbyists, public commentators or those who feel obliged to offer their opinion in matters clearly beyond their ambit of rightful concern.

As for employee share schemes, there are many in operation throughout the world and I believe are a good thing for encouraging staff loyalty and interest to the benefit of both the staff and the business. However, such matters do not benefit from intercession by governments through either enforced ownership or tax break promotional support.
Posted by Col Rouge, Tuesday, 2 December 2008 1:59:18 PM
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lorry,

Of the 23 civilizations Anold Toynbee identified commencing with Sumer, Caroll Quigley noted that all that have declined have demonstrated the inclination by the rich and powerful to maintain the status quo, rather than face changing circumstances.

In the 1930s, most Oz Banks recognized that the sovereign needs of the Australlia, exceeded the needs of coporations. Since then there has been a shift from market capitalism towards corporate nationalism, wherein the free market does not operate. Corporations and their under performing executives must be allowed to fail.
Posted by Oliver, Wednesday, 3 December 2008 3:03:27 PM
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