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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.
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