We have nothing to fear, the Prime Minister seemed to be saying in his mostly pointless address to the National Press Club yesterday, but fear and greed themselves. He wants to first fix the fear, then he’s coming after the greedy. And he’ll be packing heat.
Fixing the fear will take a while. Apparently the crisis is back on again today, just when we thought it was off. But that’s OK, wait five minutes and the markets will be back up 10%.
It’s fixing the greed that has got people animated. Rudd’s performance yesterday was mostly old material. Admittedly, when you’ve been knocking ‘em dead for days with a dynamic change of routine, it’s hard to keep coming out with radical new stuff day after day. The one new line was his battle plan for the War on Greed, involving executive remuneration.
Read today’s press coverage, and you could be forgiven for thinking he had proposed to personally vet every bank executive’s salary. In fact, Rudd’s proposal was rather minimalist. He has asked APRA — who doubtless are sitting round with nothing to do — to develop a template for him to shop around world leaders as they engage in the reform of financial regulatory arrangements which would link increased capital adequacy requirements to remuneration packages that encouraged risk.
Which, beyond incentivising (sorry) more conservative remuneration packages, won’t actually change anything.
The only action proposed by Rudd in addition to that was unspecified. Rudd said:
The Australian Government will also now be examining with APRA what domestic policy actions would be appropriate in pursuit of this objective – ie to deal with the problem of executive remuneration to (sic) financial institutions.
So, let’s be quite clear — whether people like it or not, Rudd hasn’t proposed anything that would limit any executive’s pay.
Still, the cries of bank-bashing went up almost immediately. Australian banks do not currently engender the level of absolute fury being directed toward US and European banks by average punters. Gordon Brown could propose the execution of every tenth City banker as a means of freeing up credit markets, and the only quibble would be whether to shoot them or use a slower method.
But here, banks merely engender the ordinary level of fury felt by Australians toward rapacious and gouging oligopolies. Rudd will be quite happy his decidedly modest proposals to maybe do something, sometime, about the pay of bank executives elicited such a reaction.
Malcolm Turnbull is in a bit of a difficult position on executive pay, having been a very highly-paid banking executive previously. In the wake of the One.Tel collapse in 2001, Turnbull, then with Goldman Sachs, argued that directors (he didn’t discuss executives specifically) should be paid more. However, he told Alan Jones last week:
Alan the level of executive salaries is incomprehensible to the vast majority of people. It has become excessive in my view but it is really a matter for shareholders and the shareholders of these banks and other institutions have really got to ask themselves whether they’re getting value from these salaries.
I mean I really question whether the superannuation funds are listening to their members, you know to the people whose savings they’re managing, when they go along to these meetings and vote for these big salary packages because the — I’m not suggesting that any particular;
I’m not criticising any particular chief executive — but you do have to ask yourself in these times, particularly when things are looking as tough as they are now, how these very big salaries are justified.
Which is not to suggest Turnbull’s a hypocrite. If you don’t change your views on executive pay from when you’re a top investment banker to when you’re Leader of the Opposition, you’re plain stupid. But his eminently sensible view that shareholders and superannuation funds should be more aggressive in questioning remuneration packages is exactly the approach adopted by Rudd and Swan on grocery and fuel prices — one that the Opposition was highly critical of.
Rudd hasn’t gone much further — except in public perceptions, where he now has the enviable appearance of a stern, rather puritanical father prepared to put the family fortune behind his banking offspring, but ready to clip them across the ears if they play up.