When will the message get through to corporate Australia?
More than 200,000 Australians have lost their jobs in the past year, and another 220,000 have seen their hours of work cut as companies cut costs in the toughest economic environment seen for a decade.
A few weeks ago, more than one million low-paid workers had their wages frozen in a last hurrah for WorkChoices by the Australian Fair Pay Commission.
In workplaces around the nation, workers are being told to moderate their wage claims and tighten their belts in the interests of preserving company profits.
But it’s a different story at the top end of town. The release of company annual reports over the past week
reveals that rather than accepting their fair share of the pain, chief executive officers are still enjoying lavish salaries and outrageous bonuses.
It’s as if the global financial crisis never happened.
Frankly, it’s sickening to pick up a newspaper and read that BHP Billiton’s Marius Kloppers received a 51 per
cent pay rise to $US10.4 million ($12.2 million) in 2008-09.
This is said to be a reward for the company beating its peers in the mining industry. But no one is worth a 51 per cent pay rise.
And how has Mr Kloppers achieved this? In part, by sacking decent, hard-working employees in Australia
It was only a few months ago that the small Western Australian town of Ravensthorpe was devastated when BHP Billiton decided to shut down its nickel mine. That not only cost 1800 jobs, but had a shockwave effect on small businesses that relied on the workforce for their income.
It may be easy for such decisions to be made inside the company boardroom, but out in the real world each job loss has a traumatic impact.
To see CEOs receiving extravagant pay rises in this economic climate adds insult to injury.
Australians who are jobless or underemployed know who to blame for their predicament.
Over-the-top executive pay fed reckless corporate behaviour that was a cause of global financial collapse.
With the lure of massive bonuses, CEOs, particularly in the finance sector, focused on short-term returns with total disregard for the long-term sustainability of the businesses and for the job security of the workers who contributed to those profits.
The GFC should have brought an end to this excess. But instead, as we have seen with recent company
reports, it is as bad as ever.
Last week, Commonwealth Bank’s Ralph Norris was rewarded with a 6 per cent pay rise to $9.2 million
while at the same time bemoaning how tough conditions were and requiring staff to tighten their belts and
accept pay freezes.
President Barack Obama was right on target this week when he said:”We will not go back to the days of
reckless behaviour and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses.”
Left to their own devices, it is unlikely that the boards of corporate Australia will act voluntarily to cap the pay of senior executives.
Instead, there needs to be greater regulation of CEO remuneration.
Within days, the Productivity Commission will report on its review of executive pay. The early signs are encouraging that the commission will recommend giving shareholders more say over extravagant bonuses.
But it needs to go much further.
Australian unions want to see a cap on the earnings of CEOs so their pay does not go beyond 10 times the
average weekly full-time earnings paid to employees of the enterprise.
There also need to be tighter restrictions on the payment of bonuses.
Further restraint would be provided by abolishing the deductibility from company tax for any remuneration
over $1 million.
And there needs to be a curb on “golden handshake” payouts that reward executives when they leave a
company, often in worse shape than they found it.
At Telstra, Sol Trujillo received a final termination payment of $3 million, yet few would argue whether
shareholders or employees that the company was better when he left than when he took over.
The Senate is currently debating an important new law that would give shareholders more say over these exit payments.
But following lobbying from big business, the Coalition is seeking to water down the legislation.
This bill must be passed intact to send a clear signal to corporate Australia that excessive pay will no longer be tolerated.
This article first appeared in The Herald (Newcastle) on 17 September, 2009.