Crikey’s musing on Friday about the danger
of the US housing bubble bursting is mirrored in the cover story of the latest
BusinessWeek and in an interview with Irrational Exuberance author Professor Robert
Shiller and colleagues have developed a real estate index system that the
Chicago Mercantile Exchange is about to start trading – contracts that will
allow hedging and speculation in 10 major US urban
markets without having to go near a real estate agent.
But it’s an accompanying story
on US real estate agents running for cover
that provides a little schadenfreude
for anyone begrudging local agents’ commission: the average American
is running at 5.1% – and that’s down from the industry standard of 6%
as a symptom of harder times. The hard-edged discounters in the US are
3%. The industry there has either enjoyed considerable solidarity or
American consumers are simply stupid.
By comparison, the maximum commission in Queensland’s
regulated market is capped at 5% of the first $18,000 and 2.5%
thereafter. With agents doing it tougher post-bubble around the nation, a bit
of negotiating can land a fee of about 2%.
Americans’ willingness to pay too much for
real estate agents extends to the CEOs of major companies – just like us
really, only worse. Reuters reports a corporate governance firm found 11 of the largest US companies
awarded their CEOs US$865 million in pay over the past two years while they
presided over a total loss of US$640 billion in shareholder value.
Among the 11 companies cited as having the widest gap between CEO
pay and performance were Lucent Technologies Inc, Home Depot Inc, Hewlett-Packard, Merck & Co Incand
Wal-Mart Stores Inc.
The board of directors of Lucent gave CEO Patricia Russo $17.3
million in total compensation when the company’s 5-year total shareholder
return was negative 80%, underperforming its peers, according to the
Home Depot CEO Robert Nardelli was awarded $50.7 million in total
compensation when shareholders received a 5-year total stock return of negative
The disturbing aspect is that the
remuneration racket run by consultants, boards and CEOs here forever cites the US as the
yardstick for their internationalised market. Looks like we’ll just have to try