I meant to comment on the updated ACSI report on chief executive salaries for the top 100 ASX companies in Australia, It was released a few days ago. Over the ten year period to 2010:
- Executives increased their annual salaries 131% to $4.322m. The median executive bonus increased 190%.
- The ASX increased in value 30.1%. Wages rose 53% and inflation 28.6%.
The local porkers will doubtless claim they are paid a pittance compared to those in the US where an average CEO salary for the top 350 firms was $9.3m in 2010. The US meal rose a sturdy 11% over 2009/10 as US executives showed the world they have what it takes to be both inefficient and successfully greedy.
Update (16/9): Bluescope Steel announced plans this year to sack 1000 workers and made a $1b loss. The company’s share price fell from $2-37 in February to 69.6 cents today. I am one of the unfortunate shareholders. Graham Kraehe today defended the board decision to grant executives a $3 bonus not on the basis of results obtained but because the executives had shown ‘strong leadership’. I don’t believe Graham and think this bonus is a total disgrace. Bluescope’s CEO earned a salary of $1.74 million and received an extra $700,000 for his ‘strong leadership’. (320)
Interesting comment, hc. Over that ten years there has been a “re-rating” of Australian senior managers. As companies here, for better or worse, began to recruit managers from overseas and paid US prices, managers here expected to be paid on the same scale. Around the same time, Australian managers began to get jobs in large US companies – McDonalds, Kelloggs to name two.
I think this explains a fair chunk of the ten year change.
Now, whether Australian managers are worth it is a different question. I have in my career seen several – not many – managers who built or saved a business. They were probably underpaid. most senior managers are administrators – I think the same applies to university managers – but a small number make a big difference.
What is ridiculous right now is the bonus deals some managers are getting. The bonus – or whatever it was called – to the Qantas CEO makes no sense. A manager of a struggling business deserves no bonus until he or she has achieved something. I started believing in pay for performance but eventually decided it was too hard. My philosophy was – after some years of experience – was pay high salaries and fire those who aren’t worth the money.
Apary from Qantas what about Bluescope Steel – a $1b loss and 1000 workers to lose their jobs and the porkers award themselves an extra $3m.
i agree there are issues related to US competition but the US market seems to me distorted.
As a shareholder = part owner of these firms I want to manage these decisions in a way that is far more direct than the 2 strikes policy.
Yep – a bonus or a large salary increase can’t be justified when the business is performing badly.
It happens because negotiating incentive schemes has become a game – these are my objectives, if I achieve them i should be rewarded even though they might not result in the business doing well.
The same foolishness seems to have moved to the public service and senior university management.
This seems like the canary in the coal mine for big problems in corporate governance. It is shareholders who should be putting the breaks on such excess.
The two strikes is a gesture. Boards will, as they now do, negotiate with institutions who will provide proxies for the meeting. The people who attend AGMs and make noise are very small shareholders mostly there for the free tea and sandwiches and the sample bag.
What might make a difference is to require boards to explain salaries and bonuses, not just in terms of market rates, but how they will lead to better performance.
I would also like the instos to insist that any bonus plan should be conditional of a level of total company performance. It’s crazy that few do.
Someone should set up an index fund with a strict policy of voting against any CEO salary more than 20 times average weekly earnings. Probably get killed in the rush.
If these people are such geniuses, they can buy the shares or derivatives and get filthy rich along wih the rest of the shareholders. Or go private and see how the private equity people pay them. Like union leaders, they should stop ripping off their financial supporters.
MAC1 – Not sure how it could be an index fund if you exclude the top 50 (or perhaps 75) companies by your criterion.
And the performance would be very poor.
A lot of the anti-big salary stuff is politics of envy. In fact the CEO’s salary does not make a noticeable dent in profits or dividends. I am not saying the big salaries are earned – though I have a greater objection to bonuses – but they don’t harm anyone’s pocket much.
Which is why the instos – who are the major shareholders these days – rarely object.
And the private equity people pay very large bonuses for results. Often a buyout is cooked up by senior management – as was the Qantas buyout that failed.