Mega Salaries Paid to Australian CEO’s - A Dodgy Business?

If you pay peanuts you get monkeys - right? But if you pay more peanuts you get overfed monkeys. The argument that the best CEOs need to be rewarded is a fair one, but shouldn’t there be a limit to the weight of their pay packet? There is no shortage of CEOs - they are not becoming extinct or resigning in droves. In fact there are plenty of them - one for each company - and most are being heavily rewarded. The question is are their rewards deserved?

The top salary paid to an Australian CEO two years ago was A$24.8 million. This figure is more than four hundred times the average Australian wage and it was paid to Allan Moss, Macquarie Bank CEO. Wage’s are usually increased and bonuses paid to reward an individual for outstanding performance, and in the above case Moss did perform. However eight out of the top ten top earners for the financial year ending in 2008 were rewarded with an increase in their remuneration when, in fact, their companies lost money. Share holders felt the pinch as share prices dropped and their dividends were slashed.

Ian Verrender from The Sydney Morning Herald reported today on talk back radio station 2UE that executive salary base pay has risen 121 per cent since 2001, while the average citizens’ salary has risen only 38 per cent. There is now a call for the base salaries for executives to be limited to 10 times the average wage and for the amount of bonuses paid to be voted on by shareholders.

Good news for share holders arrived on the weekend with the G20 leaders agreeing to link CEO salaries to performance. In addition bonuses will now be paid over a number of years.