||Issue No. 179||23 May 2003|
The Game’s Up
Interview: Staying Alive
Bad Boss: The Ultimate Piss Off
Industrial: Last Drinks
National Focus: Around the States
Politics: Radical Surgery
Education: The Price of Missing Out
Legal: If At First You Don't Succeed
History: Massive Attack
Culture: What's Right
Review: If He Should Fall
Poetry: If I Were a Rich Man
Satire: IMF Ensures Iraq Institutes Market Based Looting
The Locker Room
Modern Management Theory
Off the Rails
The Game’s Up
Our team of respected academics have crunched the numbers and come to the dramatic conclusion that the more you pay a CEO the worse their company performs - and vice versa.
These are not a bunch of sociologists applying some whacko economic theory, it is a sober analysis of share return, dividends and long-term viability.
You don't see academics animated too often, but when they came into Labor Council to brief us on the results a few months ago it was as if they had discovered the equivalent of accounting gold.
For those who have argued that you need to pay astronomical salaries and throw in Lotto-style options packages, we can now confidently say that their emperor has no clothes.
Once a CEO's salary exceeds the average weekly wage by a factor of 20, there is a demonstrable deterioration in company performance.
What this means for unions is that the debate about executive pay now transcends a moral argument about corporate excess and becomes a very real issue of job security.
If an executive takes home a salary that is outside the 1:20 matrix there is a real chance the company is in big trouble.
The union movement's challenge is to use this information strategically: industrially, politically and financially.
Industrially, workers should be questioning the distribution of profits armed with research showing that the money should not end up in the hands of the boss.
Politically, unions need to push governments to make decision about corporate pay more transparent and accountable. The current situation, where it is governed by the Australian Stock Exchange, itself a listed corporation, is an untenable conflict of interest
We also need to convince Labor Government to use purchasing policy to force forms to moderate executive pay; as Tony Abbott uses government funds to promote AWAs, Labor must use its financial levers to promote corporate responsibility.
And financially, we must wake the sleeping giant that is the union movement's influence in superannuation - taking the next step in protecting our members long term interest through our stewardship of industry super funds.
Unions can not sit back and allow a financial orthodoxy that is now exposed as bogus force them to raise their hands when the corporate cabal demands a pay rise.
As researcher John Shields pointed out this week, the idea that there is a market for talented CEOs, is a myth that has been perpetuated by the corporate sector. Like all else, this market is constructed.
But that's political theory; the message from this research is that when you look at the numbers the claims for high CEO pay do not add up. The message for the Top End of Town is that the game's up.
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