Australians are being very poorly served by their politicians at present. They are consumed by combat and we are being spiflicated by spin.
In the midst of the greatest economic crisis in 60 years and an impending climate disaster, there is no spirit of bipartisanship or even a modicum of reluctant co-operation during crisis. There is no intelligent debate on any issue.
I can’t remember a time, apart from 1975, when the issues were more important and the political discussion emptier.
Both sides of politics are as bad as each other. No-one, it seems, can make a speech without the main point of it being an attack the other side; no politician seems capable of assessing any idea on its merits except as an opportunity to gain short-term political advantage.
And everything, everywhere and always is about spin: frankness and substance no longer exist. The media are so cowed by the relentless pressure from political advisers and from cost cutting, and business leaders are so worried about retribution, that the politicians are not being held to account.
Yesterday’s stable door closures on executive salaries were typical, albeit minor in the context of climate change and recession.
It has been plain for years that the law on termination payments needed to be changed: with executive salaries rising at many times the rate of ordinary earnings, the limit of seven times final salary before shareholder approval was required had become too high.
But instead of a simple announcement of a change in the law to bring it up to date, what we get from Treasurer Wayne Swan and Assistant Treasurer Nick Sherry is: “We’ve identified a major loophole in current law, left to us by the previous government”, plus the public ‘naming and shaming’ of Owen Hegarty and John Alexander.
Both of these men plainly got too much on termination, especially Alexander, who didn’t actually go away, and in each case their businesses have since crumbled which makes it worse, but yesterday’s effort was pathetic.
It was not a “loophole”, but simply an out-of-date law, and Oxiana and PBL acted entirely within it. From now on, whenever old laws are updated will the government publicly “out” those who have been obeying the previous version?
In addition to that, we will now have an inquiry into director and executive remuneration in Australia conducted by three underpaid bureaucrats.
Nothing wrong with that in principle, although presumably its outcome will be filed away with all the other inquiries that have been announced by this government to create the appearance of action, before being ignored.
And while it might be argued that outsiders can bring a fresh approach to the subject, asking three bureaucrats to inquire into private sector salaries is a clue that genuine solutions are not required.
Gary Banks, Robert Fitzgerald and Allan Fels have all had modest government or not-for-profit salaries all their lives, and few if any complications to worry about in the form of bonuses.
Their collective experience with the complications of incentive payments approximates zero, but they are intelligent, forensic individuals, so there is no reason they can’t come up with some interesting ideas.
When you drill past the crust of community outrage, the issues surrounding this subject are complex and difficult, and largely result from the unintended consequences of apparently sensible laws.
All directors know, and admit, that they lost control of executive salaries after they were published in the annual reports and their CEOs saw what their peers were getting. Companies began crowding into the top quartile of remuneration to ensure they were seen as a good employer.
And then bonuses were turbocharged by the sharemarket boom and, more importantly, by the pressure for short-term performance from institutional investors.
That pressure, in turn, was fanned by superannuation choice.
Will Banks, Fitzgerald and Fels recommend that salaries should be removed from public view again, and that competition between super funds also be removed by the cancellation of fund choice?
Hardly. Perhaps they will suggest that non-binding votes on remuneration be made binding, which would make for an interesting debate. The government wouldn’t do it, of course: all the best executives would immediately emigrate and we’d end up with ninnies — as soon as Europe and America came out of their own excessive-salary induced recession, of course.
The best result would be some ideas from the Productivity Commission trio about how best to structure short-term incentives, which is the most problematic area of remuneration.
They don’t have a clue at the moment, of course, so they start with a blank sheet (in my view there should definitely have been someone from the private sector on the panel, if not two people — a remuneration consultant and a company director).
But hopefully the PC three will approach the task with an open mind, and not envy, and the business community will take the inquiry seriously and work hard to educate them on the complexities.
Perhaps the best solution is to simply cancel short-term incentives entirely and just have base salary plus long-term incentives. Simplifying the hurdles and making them fully transparent will be suggested to them, but do we really have to force companies to disclose what they are asking their CEOs to achieve over the next three years in order to bring some sense to salaries? No government would do that anyway.
And in any case the bonuses are over now and the recipients are trying to sell their holiday houses and in many cases trying to find another job.
This is indeed the stable door inquiry.