The report is being released to coincide with the 10th anniversary of the collapse of Bear Stearns, the fifth largest investment bank in the US, which had some of the world’s highest paid executives.
Report author David Richardson, a senior research fellow at left-wing think tank the Australia Institute, will on Thursday release the report, which analyses executive pay in Australia 10 years on from the GFC.
“These salaries dropped substantially during the GFC, but Australia is currently going through another surge in CEO pay, particularly in larger companies, heading back towards GFC levels,” Mr Richardson said.
“The lesson of the GFC should be that the surge in executive pay was not only unwarranted but dangerous where it accompanied a high-risk culture among some of the world’s biggest financial institutions.”
Former treasurer Wayne Swan, who with former British economic secretary Ed Balls last year launched the GFC=+10 research program of which the new report is a part, said the new analysis reveals “gross distortions in CEO pay relative to average worker earnings”.
He said ballooning executive pay and bonuses have fuelled the resentment of working people towards the business community.
“It’s one rule for the executives and another rule for everybody else,” he said.
“This is only compounded by a concerted campaign to cut taxes for our biggest companies – and there’s little evidence to show that either boosting CEO pay or cutting company tax will lead to any improvement in company performance or investment,” Mr Swan said.
The report says the government policy known as the “two-strike” rule, which introduced a spill of all company board positions in the event that a remuneration report was rejected twice in a row at an annual meeting, had likely frozen excessive CEO pay at or a bit below its peak.
Mr Swan said the two-strike rule, which he introduced in government, had had a “moderating effect” on executive pay, but the new report demonstrated that the divergence between executive pay and average earnings was accelerating again.
He said the business community needed to be an active part in a discussion about reforming corporate governance.
“If they are serious about an agenda where we grow together rather than apart, surely corporate governance reform [including executive pay] is a very big part of the equation,” Mr Swan said.
A spokeswoman for NAB said its executive salaries align with company performance and reflect NAB’s growth over the period.
“Our current CEO earns less than the previous CEO. Total statutory remuneration for NAB’s senior executives declined in 2017, compared to 2016,” she said.
The Australian Council for Superannuation Investors’ annual CEO survey, released in August last year, said that although chief executive pay has dipped slightly in recent years, performance bonuses typically worth more than $1 million are being paid to a clear majority of corporate chiefs.
The report said that even though bonuses should be for exceptional performance, the vast majority of the 83 ASX 100 chief executives included in the study received a bonus in 2016. The typical bonus was worth $1.49 million, about $100,000 less than a year earlier.
The figures also showed that when a CEO was granted a bonus, they were typically paid almost 70 per cent of the maximum amount. Typical fixed pay for an ASX 100 chief was $1.79 million, a 4.4 per cent increase on a year earlier, but below the peaks of previous years.
A spokeswoman for the Commonwealth Bank declined to comment on executive pay.
Fairfax Media has also sought comment from the Business Council of Australia.
Anna Patty is Workplace Editor for The Sydney Morning Herald. She is a former Education Editor, State Political Reporter and Health Reporter. Her reports on inequity in schools funding led to the Gonski reforms and won her national awards. Her coverage of health exposed unnecessary patient deaths at Campbelltown Hospital and led to judicial and parliamentary inquiries. At The Times of London, she exposed flaws in international medical trials.
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