Unions will wage a three-pronged assault on executive
pay in the wake of research shattering the mythological
link between gold-plated executive remuneration and
Council of NSW will pressure for legislative change,
greater activity by super fund trustees and grass-roots
industrial campaigns to end the explosion in CEO pay,
which has jumped to 74 times the average weekly wage.
The research, conducted by a team of academics commissioned
by the Labor Council, found that the often-stated link
between high executive pay and company performance does
They found that executive pay levels had exploded
in the past decade from 22 times average weekly earnings
in 1992 to 74 times average weekly earnings today. And
in the finance sector the figures are more perverse,
CEOs earning 188 times the salary of customer-service
By analysing the performance of companies against
three criteria - return on equity, share price change
and change in earnings per share - the researchers
found that excessive pay levels actually coincide with
a worse bottom line.
"If you look at the numbers, it is accurate
to say the more you pay a CEO the worse the company
performs and the less you pay the better it performs,"
researcher Dr John Shields, from Sydney University's
School of Business says.
Applying this analysis, the authors identified a
performance-optimal range for executive remuneration
of between 17 and 24 times average wage and salary earnings,
beyond which the performance of a company begins to
deteriorate. This means that any company paying its
CEO more than $800,000 begins to be a bad bet.
Labor Council secretary John Robertson says research
takes the debate about executive remuneration to a new
"This research shows that executive pay is not
just a moral issue; it is a shareholder issue and it
is a job-security issue," he says. "For workers,
it shows that an excessively paid CEO is likely to preside
over a weaker company, meaning their jobs are less secure.
A panel convened by the Labor Council found some
common ground between Federal Opposition treasury spokesman
Bob McMullan, shareholder activist Stephen Mayne and
Consumers Association's Catherine Wolthuizen.
They highlighted the vital role unions can play,
especially in their capacity as trustees of industry
superannuation funds, which have significant holdings
in the top companies.
Mayne says industry and public super funds with union
board representation account for $150 billion, or a
quarter of Australia's total market share.
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