Not since Hockey and Cormann toasted an austerity budget with two fat Cuban cigars has a symbol of elite aloofness been so universally reviled as Australia Post CEO Christine Holgate gifting four employees Cartier watches worth a combined $19,500 to reward their performance on a banking deal. Right before the AFL Grand Final, she served up a loathsome barbecue stopper.
Holgate is not the only government agency head in hot water for wasteful extravagance. ASIC boss James Shipton recently stepped aside over taxpayers footing the bill for the handling of his tax affairs.
What makes these incidents particularly galling is the agencies are underperforming during the pandemic. Australia Post customers are facing parcel delays after it changed its delivery methods. ASIC has been accused of complicity in the broken banking culture revealed by the royal commission. I’m sure I could find a pithy example for the NBN if my internet weren’t still buffering.
Scott Morrison is now considering launching an inquiry into top government employees’ salaries, tax arrangements and bonuses. This would provide a welcome opportunity to examine whether heaping bonuses and gifts upon top executives fuels any extra managerial magic, or if it really is as Marie Antoinette as it looks.
To “pre-empt an inquiry”, in classic Spiv-tionary terms, let’s take a look at what we already know.
Big executive bonuses ≠ well run agencies
Top federal bureaucrats’ salaries are set by the Remuneration Tribunal, made up of a fossil fuel executive and a wealthy investment advisor. Before their wages were frozen during the pandemic, the tribunal awarded senior public servants pay rises at almost twice the rate of their subordinates. Their overall salaries are high by global standards and even insiders admit “some of these guys are overpaid”.
Conversely, government agencies with independent boards, often stacked with partisan appointees, can set their own executive rates. This is why Holgate is paid a base salary of $1.4 million, with performance bonuses often taking her pay as high as $2.5 million (which is only a fraction of her predecessor’s whopping pay packet).
The academic evidence on the relationship of overall pay to performance remains contested. There is increasing evidence that private sector CEO pay is “more about white male entitlement than value for money”, but some believe company size and job risk factor in. Furthermore, some plausibly argue that if bureaucratic leaders fall too far behind, the public sector will experience a “brain drain”.
But on “performance-based” bonuses, the evidence is clearer – they rarely work well in the public sector. Griffith University’s Geoffrey Edwards wrote for The Mandarin that performance pay “rewards orthodoxy, not innovation”, by preferencing target-hitting over mission-fulfilling. Anyhow, it is extremely difficult to attribute successful outcomes to top managers when they are so heavily reliant on their teams.
This is why Victoria has axed performance pay for its departmental bosses, and the federal government is using it less and less, especially among the already well-paid. Victoria’s move followed a review suggesting the practice was “ineffective in driving performance”.
Especially when combined with fixed-term contracting, the review found bonuses “tend to support a focus on individual performance within the contract term, compared with collaborative achievement and longer term public service stewardship”.
Morrison, himself a former high-paid government agency head, will likely use these incidents as an opportunity to virtue signal, and perhaps further broad-based wage freezes for hard-working rank-and-file public servants.
But as much as politicians may now denounce this culture, it has been awfully convenient for them. Public servants in insecure jobs, focused on short-term targets, do not deliver the “frank and fearless” advice and service delivery that was once the core role of career mandarins.
Perhaps the political class will wear Cartier-style headaches for the convenience of a compliant and corporatised state.