There has been an extraordinary rise in executive salaries in Australia over the past 10 years with a widening gap between what CEOs personally earn and what they choose to pay their employees.
The ACTU’s Executive PayWatch highlights the blatant hypocrisy of big business executives in pushing for industrial relations deregulation that would cut the pay, conditions and rights of Australian workers.
A tale of greed and inequality
After a short period of restraint in 2008-9, executive pay has resumed the upward trajectory seen in the years leading to the Global Financial Crisis, a period in which the obscene levels of incentives and bonuses for company executives fuelled unsustainable business practices that resulted in the loss of jobs and shareholder wealth.
The average total remuneration of a chief executive of a top 50 company listed on the Australian Securities Exchange in 2010 is $6.4 million – or almost 100 times that of the average worker.
Australians are rightly outraged at the excesses of the business community before the Global Financial Crisis. Ridiculously high salaries and unwarranted bonuses contributed to the financial meltdown by encouraging executives to take risks in pursuit of short-term profits.
Millions of working people around the world are now paying the price for this unethical business behaviour through joblessness, higher taxes and reduced public services. Although Australia has been spared the worst of the financial crisis, there is no room for complacency. Much more needs to be done to strengthen our economy to ensure there is no repeat of the GFC and to achieve a more equal and just Australia.
We need stronger curbs on executive salaries and measures to force businesses to look to the long term sustainability of the company and to serve the interests of the whole Australian community, not just their shareholders. We need fairer taxation and an end to the rorts and loopholes benefitting high income earners.
And we need to strengthen the rights of Australian workers and ensure employees are able to bargain collectively for a decent share of the nation’s wealth.”
- The average total remuneration of a chief executive of a top 50 company listed on the Australian Securities Exchange in 2010 is $6.4 million. The average CEO’s total pay packet is now worth almost 100 times that of the average worker.
- Executive pay rose by an average of over $940,000 over the past year - the equivalent of an extra $18,000 a week, while the annual wage for a full-time worker rose by just $3200, or $62 a week.
- Since 2001, the base pay for executives has risen by 130%, while average weekly earnings have risen by 52%. Inflation over the same period has been 28.6%.
- Across the economy, profits soared by 27.5% in 2009-10 financial year. Gross operating profits in mining have risen by 60.6%, while wages grew by just 3.8%. Construction profits rose by 55.5%, but wages by just 2.9%. And profits in the information, media and telecommunications sector grew by 10% - five times wages.
- Company profits as a share of national income are now back to the record levels of 2008, while the wages share is the lowest since 1964.
Executive pay out of synch with trends in wages
In June 2010, average weekly earnings for full-time adults (AWOTE) were $1253.10. For men, it was $1337.10; for women $1105.70 – a 21% difference. Full-time AWOTE have increased by 5.2% over the past 12 months.
The National Minimum Wage is $569.90 a week (from 1 July), following the award of a $26 per week rise (4.8%) by Fair Work Australia. That followed a wage freeze in 2009. CEO base pay is 69.1 times the minimum wage.
Wages in Australia, as measured by the Wage Price Index, have been growing at a slightly lower rate than their long-term trend.
The Wage Price Index increased by 3% in the year to June 2010, slightly below its long term trend rate of 3.5%. In the public sector, the WPI increased by 4%, while in the private sector it was 2.7%.
The largest wage increases were in electricity, gas, water and waste services (4.7%), health care and social assistance (4%), education and training (3.9%) and mining (3.8%).
Union members on average earn $145 a week more than non-members.
Unions have proposed tighter restrictions on executive pay in a number of ways:
- Capping the base salaries of CEOs at a maximum of 10 times the average earnings of employees within that company.
- Ending the bonus culture that rewards risky short-term behaviour by executives at the expense of long-term productivity and customer satisfaction.
- Ensuring all employees in an enterprise - not just the CEO - are appropriately rewarded for their contribution through fair industrial relations laws and practices.
- Taxing companies at a higher rate for paying CEOs more than $1 million and cracking down on income tax avoidance through trusts and private companies.
- Enabling shareholders to rein in executive salaries and to sue for poor executive performance.