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Sydney Morning Herald Online
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Editorial



And the gap grows wider

November 6, 2003



Margaret Thatcher said there was nothing so powerful as an idea whose time had come. Such is the force of its persuasion or the breadth of its embrace that it overwhelms those who stand in its way.

You would be forgiven for having thought public clamouring for equity and reasonableness in the way corporate riches are dispensed, and more accountability by those who dispense them, might by now have gathered such tidal momentum.   There are pockets of common sense, including expanded transparency requirements, but the Herald's Power Salaries special report, published yesterday, is an exposition of how much further there is to go.

The average remuneration for the top earner at Australia's biggest 150 companies is $2.27 million.   Ten years ago, they received 22 times average earnings.   It is now nearer 80 times.   Public and shareholder concern is directed not just at this chasm - the envy gap - but at the perversity of big rewards being delivered to CEOs, chairmen and others judged to have failed their tasks.

And yet, for all the political huffing about greed among Australia's top earners, for all the table thumping of institutional investors about curtailing these excesses and bringing companies to account for disparities between executive largesse and executive performance, for all the indignation of mums and dads at the riches directed to corporate executives, while their superannuation investments stall or shrink, the gravy train slides along with little interruption, its passengers bewildered by or dismissive of, the fuss swirling around them.

Business has a right to defend its positions vigorously.   Its arguments should be rigorous, too.   Business hostility to enhanced transparency and accountability is an old-world sentiment, more befitting a time when publicly listed companies were the domain of cosy clubs of stockholders.   That is a far cry from today when the near universality of superannuation has introduced millions of Australians to share trading - directly and indirectly.   Their retirement comforts depend on the performance of companies attracting their superannuation savings.   The shareholder is now akin to the taxpayer, with as much right to be informed about a company's conduct as they are to that of government.

There are problems with some of the proposed government reforms, such as the move to reveal still further executive pay packets (up to the top 10).   There is a strong belief in business that this will lead only to salaries being ratcheted up for another level of executive.   However strong and reasonable that belief, it is a manageable issue for corporate leadership.

It is one thing to argue, as Kerry Packer did last week, that peanuts attract only monkeys.   The cult of the celebrity CEO, however, built on very high rewards, creates the danger that too little credit is given for the team effort that underlies success in any organisation.   And what happens when amply rewarded executives behave like monkeys? Too often their rewards remain unaffected.   Increasingly, this is the biggest issue for shareholders.   They want the market in executive salaries to work more like a market should.





 For archive purposes, this article is being stored on TheWE.cc website

The purpose is to advance understandings of environmental, political,
human rights, economic, democracy, scientific, and social justice issues.
             Globalization

‘the circus of deception continues...’

Environment News

TheWE.cc