The idea of the mandatory disclosure of a CEO pay ratio for every listed Australian company is just starting to emerge on the Australian political and corporate scene, as the ALP pushes a requirement for all listed Australian companies to reveal how much the CEO is paid compared to the average wage of the company’s median employee.
This is an American idea that started after January 2017 and is now a commonplace disclosure in the proxy statement for annual meetings (similar to the notices used to list the issues for company annual meetings in Australia).
The idea emerged out of the fallout from the Global Financial Crisis and proved mildly controversial at first, but has faded as an issue only to resurface when a high ratio is revealed. However the idea has opponents in American business, and it will no doubt be the same in Australia, with media mates of those moaning corporates hopping on the bandwagon (no doubt led by News Corp’s Australian papers, with The Australian in the vanguard).
Why News and the Oz? Well the pay ratios for the CEOs of the two companies are a bit close to home and a bit rich.
Men of the people
At the Murdoch-owned 21st Century Fox the latest proxy statement discloses the CEO pay ratio for James Murdoch (who earned US$50.2 million in the year to June 30 in cash, shares and the awards) was, wait for it, 741 times that of the median Fox employee whose compensation was set at US$67,809.
Lachlan Murdoch, who was paid a total of US$50.4 million, had a similar ratio (he is co-executive chair, which is not covered in the rules, only the CEO), while dad Rupert’s ratio would have been closer to 700 times that of the median pay of a Fox employee.
The compensation for the median Fox employee of US$67,809 doesn’t seem very much for such a rich and powerful company with film, TV and cable news operations. But there is an explanation for that — many of the high-profile stars of screen, TV and cable news are contractors and not employees.
Over at News Corp, the CEO pay ratio for Robert Thomson — who was paid a total of US$12.97 million in 2017-18 or around A$17 million, making him one of the highest paid CEOs of a company whose shares are traded on the ASX — was a more modest 234 to 1. The compensation of the median News Corp employee was US$55,475 or A$78,024.
In fact, in something of an irony, Robert Thomson is a bit of a pioneer — his pay ratio was the first ever for the CEO of a company in Australia (News is a US company) whose securities are traded on the ASX. The highly-paid editors at The Australian and the company’s tabloids will now surely take a close look at their own pay ratios and Thomson’s and wonder at the disparity.
As a comparison point, the compensation of the median Amazon employee was US$28,446 last year. CEO Jeff Bezos had a pay ratio of only 59 times that salary. You might say that he has mega wealth because he owns 16.4% of a company worth more than US$900 billion.
The Murdochs control 39% of the voting shares in Fox, which paid 36 US cents a share last year and News Corp, which paid a total of 20 US cents a share. Amazon doesn’t pay dividends. If Bezos can get by with a ratio of 59, then why can’t the Murdoch men (with the added bonus of the flow of dividends into the Murdoch family trust)?