I have always found it irritating when interest groups like the Business Council of Australia complain about Australia’s uncompetitive wages and the need to cut penalty rates or the minimum wage, as well as slash company taxes, but conveniently refuse to address the egregious blow-out in CEO and senior management pay.
At a time when real employee compensation is falling, despite rising labour productivity, average CEO pay packets in the top 100 companies has surpassed $5 million, according to recent research from The Australia Institute:
Moreover, the latest CEO pay report from the Australian Council of Superannuation Investors showed that CEO pay deals have surge to highest level in 17 years thanks to “persistent and increasing” bonuses:
With this background in mind, it’s interesting that Labor intends to implement a CEO pay ratio, whereby listed companies with more than 250 employees would be required to disclose the ratio of CEO earnings to the pay of their staff. From The Australian:
In a speech at the ALP-aligned Maurice Blackburn law firm today, opposition assistant treasury spokesman Andrew Leigh will declare Australia faces a “reversal” of conditions in the 1970s when wages accelerated well ahead of productivity…
“Shortsighted businesses want low-paid workers and high-paid customers,” Dr Leigh will say…
“There is nothing in free market capitalism that says CEOs need to be overpaid. Indeed, excessive CEO pay makes firms less profitable than they should be,” he says.
“Labor’s policy addresses public concern about the disproportionate growth in executive remuneration and extends current market reporting requirements for public companies in a way that will help inform investors as they calculate risk in their investment decisions. This is a pro-growth reform.”
Does anyone seriously believe that the Australian economy is more innovative and dynamic now than before the 1990s when so-called “performance-based pay” spread?
Labor’s idea has merit, although I am unsure whether it would make much practical difference to CEO pay.
