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Aug 13, 2015

CEOs trump MPs for profligacy, but at least they’re not wasting our money

The Australian PM would only come in about 100 in a list of Australian CEOs if his perks were included with his salary. But CEOs are not funded by the taxpayer. Economist and freelance journalist Jason Murphy reports.

MP pay is outrageous, right? Not compared to the fat cats running Australia’s most profitable companies. We need to keep MP pay in perspective. There’s a lot of them, so their costs add up, but they are not paid anything like the people occupying the CEO chairs of Australia’s public companies. The Australian Financial Review does a big report on the top 300 CEO compensation packages each year. The best-paid CEO in 2014 was David Gyngell of Nine Entertainment, who pulled in $19.6 million in compensation. The 300th CEO on the list was Rob Atkinson of Energy Resources of Australia, making $869,000. There are no MPs being paid $869,000. Not even our PM. Tony Abbott gets about $507,000 in salary deposited into his personal bank account each year. That means the top CEO is paid about 39 times as much as the Prime Minister. Of course, the PM is also given some serious perks in the form of access to the Lodge and Kirribilli House. Once you take those into account, the value provided to the PM is clearly more than a million a year. He might sneak into the top CEO list at around the 100 mark. The 100th best-paid CEO, David Harrison, runs real estate company Charter Hall, and was paid around $2.8 million in 2014. But most MPs are paid the basic $195,000 a year. You could add their “entitlements” to their pay and get a bigger number. But the pollies (mostly) don’t pocket their entitlements. Foreign Minister Julie Bishop, for example, would soar well over a million in pay plus entitlements. But it would make for a dud comparison, as Bishop travels extensively for work. Private companies also spend up big on their CEOs' travel and offices but most of that doesn’t count as compensation. We have no way of seeing that expenditure. So it’s worth remembering that no matter how flashy our MPs might seem, CEOs are splashing a lot more cash, and doing it with a lot less transparency. We get to see how much our MPs spend on their offices, in cold hard detail. For example, Attorney-General George Brandis spent $129,000 on his within the last six months of 2014. That makes a taxpayer red in the face. But would it make a CEO blush? I doubt it. CEOs have corporate credit cards that get a work out. That doesn’t count as compensation. And in the United States, family members of the CEO travel on the company’s purse. In Australia, finding out about such expenditure is very difficult. CEO compensation is disclosed in annual reports -- things like salary, bonuses, shares and leave accrued -- but the amounts spent on their offices are not. Travel bills are also buried deep in the expenses section of the whole company. Whole categories of perks are probably never publicly mentioned. So is it fair to compare CEOs to MPs? Each company has just one CEO. The Parliament has 150 MPs in the House of Representatives and 76 senators. Some of them are like a chief executive of their electorate, working hard to represent around 100,000 people each. Others are like bad employees, clock-watching and adding very little value. But they all get paid the same. Allowances and perks given to MPs add up. The total cost of running our MPs is half a billion a year. But one key difference is that CEO pay never sets a precedent in an organisation. It’s always a one-off cost that applies to just one person, so the case for thrift is harder to make. In a big organisation, even truly extravagant CEO pay is rarely material to the bottom line. The reason both MP pay and CEO pay raise red flags is that the payments are not really market rates of pay. MPS get their pay set by their colleagues -- other MPs. But so do CEOs. They have a remuneration committee stuffed with their mates to determine what counts as fair market reward. CEOs get paid more, and with less oversight. So should we loosen the pressure on our MPs? Ultimately, no. The difference is that MPs are paid with our money. That gives us the right to demand value.

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9 comments

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9 thoughts on “CEOs trump MPs for profligacy, but at least they’re not wasting our money

  1. Benny

    MPs get paid with our money. And where does the money that pays the CEOs of our supermarket duopoly, or of the big four banks, or our airlines come from? Surely from the large proportion of our income that goes towards groceries, mortgages and travel. So the difference is what?…. we have a choice whether to eat, whether to borrow money to buy our houses or to travel overseas by other means than flying? I don’t think so. The difference is that governments are supposed to be held accountable for how they spend our money, which is fair enough, whereas private companies are not because they’re in it for profit. Maybe that sounds like a good justification to capitalist fanboys, but not to me.

    Incidentally I have a family member in the business world, well below the level of CEO, whose employer happily flies him home interstate each weekend if he’s working away, or alternatively flies their families to him and puts them up. Is that sort of thing really so uncommon?

  2. Decorum

    I do love the word “compensation”. It suggests that the pay and perks is just offsetting – or compensating for – all the hard yakka, stress etc that the CEO/MP is putting in. Gyngell’s job must be sheer hell if it takes $19.6m to compensate him for doing it.

  3. sang froid

    And those kids running amok in Qantas first class – their dad is probably a captain.

  4. The Pav

    Yet these CEO’s bleat like hell at the idea of the workers getting a living wage, can’t handle competition and will trash ethics in the puruit of profit

  5. AR

    In reality we, the taxpayers, are subsidising CEOs for their perks and especially their 1st class travel as it is a tax deduction, meaning that we mugs make up the difference.

  6. David Hand

    I can tell you AR that when you’ve travelled as much as your typical CEO does, it’s not a perk. C level executives are typically so time poor that business related travel by them is done because it’s a necessary part of the job. I’m not saying that junkets don’t occur but that is more a phenomena in middle management than the C level. But then, your average MP is more like a middle manager than a CEO.

  7. Jack Robertson

    There is no such thing as a distinction between ‘private’ and a ‘public’ economy/money now. What the hell do you all think the last three decades of relentless economic reform has been about!!??

    The only people on the planet who want you to think that a CEO ripping off his shareholders is somehow qualitatively different to an MP ripping off her voters are…the grubs in the private sector doing that ripping off. Oh no, they all bleat. Ours is ‘private’ sector money, a matter for shareholders, a matter for ‘the market’. And the market is happy to pay (or at least,that bunch of old school mates on the Board is happy to pay…)

    Private v. Public economy? There is no such fucking difference. They got what they want, these grasping corporate arseholes. Now let them reap the fun. Let Crikey spark up on them, on the subject of corporate rorting and gross over-remuneration.

    Every Australian has every bit as much right to go these grasping suited grubs as we have our MP’s. More so, in fact, given the lack of transparency and accountability in the corporate world, in comparison to the relatively minor scale of political rorting.

    Private v. public economy distinctions….give me a fucking break, please.

    Let’s leave aside the billions of dollars now churning around in that grey, increasingly dodgy twilight zone of the public-private project. Our stake/their gain: our money increasingly handed over to commercial companies, with no scrutiny or recourse, and, generally, built-in profit guarantees and commercial escape clauses if our great (overpaid) captains of industry have fucked up their project numbers or market forces turn on the useless wimps down the track.

    Let’s sidestep the hundreds of millions if not billions of public monies skimmed during the Great Thatcherite Flog Off & Strip Down, the gouging privatisation consultancy and advisory fees, the endless public-funded private company studies and surveys and eye-popping legal bills, the invention and appearance of strange new self-defining and self-justifying private companies suckling off the public titty…the massive costs of the corporatisation of the public service….the deep inefficiencies of redundancy/fire/rehire/contract/lay off/rehire/retrain/reskill/rehire/consult/consult/consult….where once there used to be just tenured public servants.

    All this endless fucking churn of public money into private company fucking hands. In the name of ‘market efficiency’ and ‘reform’. Trult one of the great sustained Snake Oil swindles in mercantile history, all coming to a head now that the public money’s been bled dry, the bill is coming is, and all the bullshit about debt-proofing our collective future via infinite market wizardry stands revealed (with tedious predictability) as a monumental three card con.

    Forget all that. These are secondary reasons for my right to go the Gyngells of the ‘private’ economy for their fantastical greed.

    Here’s the real reason why their salaries and rorting are every bit as much my business as Bishop’s chopper ride or Tony Burke’s family trip to Uluru:

    It’s now ‘publiç’ law that at least 9.5% of every single dollar I earn is compulsorily handed over to the world of these ‘private’ economy arseheads. Once upon a time all I had to pay was tax. That was what used to be public money.

    If I wanted to I could choose to invest in the private sector, too. This was called private money. My choice. Give it to guys like Gyngell, pay their whopping tab. Hoping to make a private buck. My choice.

    No more.

    I am now whether I like it or not funding the corporate sector with my superannuation contributions, in exactly the same way as I am funding the public sector with my tax. The way public policy is going, more of my money is going to get compulsorily handed over the Gyngells, and less and less to the Bishops/Burkes, and I am going toget less and less say and scrutiny over what’s done with it.

    Compulsory super contributions are now a vast, vast, vast pool of my – our – investment monies, channelling and trickling and rushing and oozing into, ultimately, the likes of David Gyngell’s salary package.

    Every bonus he gets, every share issue he converts, every drink he puts on the tab at the Crown, every little corporate perk he enjoys…wll, it has a piece of my dough attached. Small, maybe. But it’s there.

    Compulsory superannuation savings (on my part) means I and every other member of the ‘public’ sector have no choice but to hand the ‘private’ sector a tithe, a pool of guaranteed corporate ante/stake money, essentially, for unremarkable business performers like Gyngell – by no means a dill, sure, but not remotely worth nineteen million bucks annually (especially given, for example, the tanking Nine Entertainment ASX SP of late).

    Why?

    Because no CEO on the planet can possibly be worth that much. Can possibly value-add to that degree; nineteen million bucks a year for the CEO of an ASX listed entertainment company? It’s a fiscal nonsense, an obscenity made possible only by the symbiotic nature of the CEO/Board daisy-chain of mutual remuneration, and the aforementioned now-universal flood of funds.

    When I can opt out of compulsory superannuation by all means have your public/private economy distinction back.

    Until then, as far as I am concerned, a David Gyngell is spending my money every bit as much as our politicians

    And at least I get to vote them out.

  8. Jack Robertson

    Thanks Benny. Pardon the typos and ear-clunking double ups (more performance art than comment, Crikey’s getting very pedestrian/vanilla lately). I am of course lazily long-winded, instinctively foul-mouthed and borderline incoherent (though I like to think as a matter of political, aesthetic and epistemological tactics/principle)…but happily I think the times ahead will suit me. Lunacy the new lucidity/profanity the new sanity, all that.

    (And a poet, too. What’s not to love, Benny…?!)

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