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2009/07: Should CEO's salaries and termination payments be reduced?<BR>

2009/07: Should CEO's salaries and termination payments be reduced?

What they said...
'The recent financial crisis highlights the lack of correlation between ability and pay. While Australian and international financial executives have received enormous salaries, they have not protected their shareholders from billions of dollars worth of risky investments'
Dr Richard Denniss,October 2008

'The Government's announcement is ... is another childish attempt to blame our economic problems on executive greed'
Michael Costa, in an opinion piece published in The Australian on March 27, 2009

The issue at a glance
On February 5, 2009, the Obama administration in the United States announced that failing companies which had received financial assistance from the United States government would have the annual salaries of their chief executives capped at half a million US dollars.
The size of executive salaries attracted media attention in Australia after it was reported that the clothing manufacturer, Pacific Brands, had awarded its top executives rises worth millions of dollars. This followed soon after the company had announced that it would be taking much of its operation off shore and that 1,850 jobs would be lost within Australia.
On March 18, 2009, the Australian Government announced changes to the Corporations Act which would allow shareholders to veto executive payout packages that were larger than the executive's annual salary.
On the same day the federal Government asked the Australian Productivity Commission (PC)  to examine how Australian company directors and executives are paid.
The debate over how much chief executives should be paid has been fuelled by the current world financial crisis.

Background
Checks on executive salaries in the United States
On February 5, 2009, President Barack Obama and Treasury Secretary Timothy Geithner announced the United States government will require financial companies getting Government aid (or bailout packages) in the future to cap compensation of top officials at $US500,000 ($780,000) a year.
The United States administration is imposing conditions that would force greater transparency for expenses such as corporate jets, office renovations, entertainment and holiday parties, and restrict severance pay when executives leave the company.
While pay would be limited, there are provisions that would allow additional compensation in the form of restricted stock that cannot be sold until taxpayers have been paid back with interest. Senior executive compensation plans also must be submitted to a non-binding shareholder resolution.
The compensation cap may be waived for companies getting aid through what the administration terms "generally available capital access programs'' through full public disclosure and submission of a resolution to shareholders if requested.

Checks on executive salaries in Australia
Under the former provisions of the Corporations Act in Australia, a company director with seven years of service and an average annual pay of $2 million over his final three years before retirement was entitled to a termination payment of $14 million without shareholder oversight.  This is because there are no restrictions applied on company executives' retirement packages so long as they are no more than seven times the executives annual salary.
On March 18, 2009, the federal Government announced changes to the Corporations Act. Under these changes to the Corporations Act, any payout beyond the value of one year's pay (excluding bonuses) would have to go to a shareholder ballot. The new rules would be backed by criminal sanctions.
The federal Government has also announced a Productivity Commission inquiry in the payments received by company directors and executives.

The Australian Productivity Commission Inquiry into Company Directors and Executives Remunerations
The press release announcing the establishment of a Productivity Commission inquiry into company directors and executives stated, 'Professor Allan Fels AO has been appointed as an Associate Commissioner to the PC to be a key member of the examination. The Productivity Commission Chairman Gary Banks will preside over the examination along with Commissioner Robert Fitzgerald.
Unrestrained greed in the financial sector has led to the biggest global recession since World War II. It has now spread across the world and instigated significant slowdowns in the US, Europe, China and caused more than 50 banks to collapse and millions of jobs to be lost.
There is significant community concern about excessive pay practices, particularly at a time when many Australian families are being hit by the global recession.
The Rudd Government is determined to ensure regulation of executive pay keeps pace with community expectations, particularly as job losses increase as a result of the global recession.
This will be a broad-ranging examination that will consider the existing regulatory arrangements that apply to director and executive remuneration for companies that are disclosing entities under the Corporations Act 2001, including shareholder voting, disclosure and reporting practices.
The inquiry will also examine international trends and responses to the problems of excessive risk taking and corporate greed.'

Internet information
On April 7, 2009, the SBS current affairs program Insight conducted a studio discussion and debate on the question of executive salaries and termination packages.  This was a wide-ranging discussion allowing input from a variety of stackholders.
A full transcript of the studio discussion can be found at http://news.sbs.com.au/insight/episode/index/id/60#transcript
An identical transcript of the program can be found at the site of the Minister for Superannuation and Corporate Law, Senator Nick Sherry. http://minscl.treasurer.gov.au/DisplayDocs.aspx?doc=transcripts/2009/013.htm&pageID=004&min=njs&Year=&DocType=

On March 21, 2009, ABC National Radio's philosophy program, The Philosopher's Zone, conducted a discussion titled, 'Understanding and blame while the money runs out'. Key contributors were Tom Campbell, Professor and Director of the Centre for Applied Philosophy and Public Ethics, Charles Sturt University, Australian National University and the University of Melbourne and David Neil, Lecturer in the Philosophy Program,University of Wollongong.
A full transcript of this program can be found at http://www.abc.net.au/rn/philosopherszone/stories/2009/2518164.htm

On March 21, 2009, the Fairfax online business information site BusinessDay published the transcript of a discussion between four leading Australian business executtives giving their views on CEO remuneration.  These views were originally published in The Age.  The full text of these views can be found at http://www.businessday.com.au/business/leading-business-executives-have-their-say-20090320-9483.html?page=1

On March 18, 2009, the federal Government issued a press release announcing the establishment of a Productivity Commission inquiry into executive remuneration.  The full text of this media release, including some of the terms of reference of the inquiry, can be found at http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/025.htm&pageID=&min=wms&Year=&DocType=0

On November 29, 2008, The Sydney Morning Herald published a report on a UMR Research survey showing popular attitudes in Australia to executive salary levels.  The text of this report can be found at http://www.smh.com.au/news/national/voters-want-controls-on-corporate-salaries/2008/11/28/1227491827183.html

On September 10, 2008,  on opinion piece by Harry Binswanger 'Just Pay for CEOs: Why Some CEOs Deserve Huge Salaries' was published by Capitalism Magazine.  The full text of this opinion piece can be found at http://www.capmag.com/article.asp?ID=5264

On February 14, 2008, Green Left Weekly  published an opinion piece by Lee Sustar titled, 'United States: Rewarded for crashing the economy' which compares rising corporate salaries in the United States with the poor  health of the United States economy.  The full text of this opinion piece can be found at http://www.greenleft.org.au/2008/740/38295

On March 16, 2009, the e-journal, Online Opinion, published a commentary titled, 'A cap on CEO salaries - creeping socialism?' by Dino Cesta.  The piece argues that Australian CEOs are being unfairly targeted and that reducing their salaries could have adverse effects on Australia's corporate health.  The full text of this article can be found at http://www.onlineopinion.com.au/view.asp?article=8666&page=0

On March 16, 2009, the e-journal, Online Opinion, published a commentary titled, 'Commonsense fairness  CEO pay' by Klaas Woldring.  Woldring argues that government intervention is necessary to regulate CEO remuneration.  The full text of this article can be found at http://www.onlineopinion.com.au/view.asp?article=8670

Arguments in favour of reducing CEO salaries and termination payments
1.  CEO salaries and termination payments bear no relation to the value of the work these chief executives perform
It has been claimed that a false nation of 'market value' has been applied in determining the salaries to be paid to chief executive officers.  According to this line of argument, once a particular salary has been paid to one CEO, then that rate of pay becomes the norm for all or at least many CEOs.     Shaun Carney, writing in The Age in an opinion piece published on March 25, 2009, stated, 'It's quite a sweet deal. Pretty much every company has been bidding up the price without regard to any visible set of performance metrics, merely "they're paying that bloke over there that much, so we'll have to as well".'  Those who object to this salary-setting process claim, with Shaun Carney, that it is largely detached from any objective estimation of the value of the work actually performed by CEOs.  
Dr Klaas Woldring, a former Associate Professor of Southern Cross University, in an article published in Online Opinion on March 16, 2009, has stated, 'Remember first of all that there is little or no correlation between CEO's compensation and organisational performance. There are numerous instances of obscenely high payments for CEOs while poor organisational performance is the norm. The "pay peanuts and you get monkeys" justification of high packages is nonsense.'
A similar point has been made by Dr Richard Denniss in a report titled, 'The case for a new top tax rate' written for the Australia Institute and published in October 2008.  Dr Denniss states, 'The recent financial crisis highlights the lack of correlation between ability and pay. While Australian and international financial executives have received enormous salaries, they have not protected their shareholders from billions of dollars worth of risky investments. Meanwhile, the much-lauded regulators in Australia receive significantly smaller remuneration than those they are responsible for regulating.'
It has been argued that high salaries actually discourage high levels of executive performance.  A position paper released in April 2009 for the Productivity Commission's review of Regulation of Director and Executive Remuneration in Australia stated, 'In summary, when executive salaries are unduly inflated, change and progress is stymied. In particular, many of the executives often value money and wealth inordinately-a value that often coincides with uncooperative or rigid behavior. Alternatively, these executives often embrace the existing hierarchy, which culminates in the unmitigated rejection of divergent attitudes and attributes. Finally, these executives often epitomize the dominant echelons of society, and hence diversity is infringed and creativity is inhibited.'

2.  CEO  salaries and termination payments have grown at an unsustainable rate over the last twenty to thirty years
In an opinion piece published on March 4, 2009, and written by Shaun Carney, it was stated, 'In the past 30 years, the relativities between the average wage and executive pay have grown almost exponentially. As workers have been told ceaselessly that they must do more if they expect to improve their incomes, which is only fair enough, given how sloppy the nation's productivity  performance has been over a long period, there's been no similar message for those at the top.'
CEO salaries have grown rapidly in Australia in recent years, with the Australian Financial Review estimating that earnings of the chief executives of Australia's largest 300 listed companies rose by 28 per cent in 2006-07 (Kirk 2007). This was compared to average full-time income growth of 3.4 per cent over the same period (ABS 2008).
A similar situation pertains in Canada. Janet McFarland, reporting in Canadian Report on Business.com noted on May 9, 2006, 'A 'Report-onpBusiness' survey of executive compensation shows that Canada's CEOs saw their pay soar an average of 39 per cent in 2005 compared with 2004 (itself a year of huge compensation increases) as stock markets and commodity prices rocketed higher.
While salaries and bonuses climbed a modest 6 per cent last year, CEOs saw their stock option gains climb 47 per cent over 2004. CEOs on average earned $1.8-million each from exercising stock options - a number that climbs to $4.5-million if only those CEOs who cashed out options are included.'
The situation is more dramatic in the United States.  On March 19, 2009, Bruce Watson wrote for The Daily Finance, 'In 1965, the average CEO made 51 times the minimum wage; by 2006, CEO salaries had risen to 821 times times the minimum wage. Put another way, in the same period of time, CEOs went from making 24 times the wages of their average workers to 262 times the wages of the average worker. This means, incidentally, that the average CEO in 2007 made more in the first day of work than their average employee made all year.'
As an indication of the unsustainability of such payments, a recent survey of Australian company directors indicated that very many directors believed that the salaries paid CEOs are too high. A survey by consultants McKinsey of the directors of the Australian Stock Exchange's top 200 companies found 42.5 per cent of these companies' directors believed senior executive remuneration was too high and 9.2 per cent thought it was far too high. Of those that said bosses were paid too much, 22.2 per cent said senior executive remuneration was 100 per cent over the mark, or twice as much as the executives were worth. Another 47.6 per cent said the pay was 50 per cent too much.

3.  Some of these payments have been made to the chief executives of companies in receipt of Government bail-out money or which have laid off large numbers of workers
It has been claimed that some of the high salaries being paid to CEOs are particularly inappropriate as the companies concerned have needed to be supported by large Government bail-outs or subsidies.  Further, some of these companies have further demonstrated their poor performance by laying off large numbers of workers.  These points have been made by Robyn Riley in an opinion piece published in The Age on March 17, 2009.  Riley  argues, 'The Rudd Government has been severely embarrassed by the overseas retreat by giant clothing manufacturer Pacific Brands.
The fact that the Government helped prop up the company to the tune of $20 million, only to see its executives grant themselves significant income boosts in the wake of the poor share performances, illustrated just what a double-edged sword such funding can be.
Yesterday the US Government suffered similar embarrassment when troubled insurer American International Group revealed it intended to pay hundreds of millions of dollars in bonuses and retention pay to its top executives.
No, not a sign of recovery for the ailing economy, just another example of gob-smacking arrogance and greed. AIG was one of the companies bailed out by American taxpayers to the tune of $170 billion. It was the biggest government rescue of a US company, deemed necessary after the giant insurer posted the biggest quarterly loss in US history.
You would think, then, its executives would feel a little humble, grateful even. Apparently not, because despite the outrage at the news AIG said its hands were tied and the bonuses would be paid.'  

4.  There is widespread popular support for strengthening regulations effecting CEO salaries
It has been argued that current regulations in Australia designed to regulate CEO salaries are either inadequate or ignored.  Economic commentator, Alan Kohler, has discussed the inadequacy of Australian corporate regulation.  He has written, 'The new non-binding vote on executive salaries is not really a vote on executive salaries; it's a resolution to adopt the company's remuneration report. Except the great majority of companies don't have one.
Many don't even show the salaries of the top five executives, as required by law since 1998, but instead stick to the old $10,000 bands. These merely show the number of executives in each band; you have to guess who's who.
And as for the remuneration policies -- that is, why the top five executives get paid what they do -- forget it. It's a total, entirely deliberate, mystery.
That despite the fact that s.300A of the Corporations Act clearly requires a remuneration report to be included in the annual report that contains discussion of remuneration policy, discussion of the relationship between that policy and the company's performance, and what each of the top five executives got paid.'
There appears to be widespread loss of confidence in allowing market forces to determine CEO salaries. In October, 2008, UMR an opinion research company, based in Australia and Zealand, conducted a survey on Australian attitudes to CEO salaries.
The survey findings indicated 92% of Australians believe that CEO salaries in Australia are too high and 78% think they are much too high. 72% of Australians support government regulation of CEO salaries whilst only 14% oppose this. 80% of Labor voters, as well as 63% of Coalition voters think the government should regulate CEO salaries. Only 3 per cent thought executive salaries were "about right". No one thought executive salaries were too low. Voters in NSW and Queensland were the most supportive with 75 per cent advocating intervention.
UMR pollster, John Utting, said it was rare for a poll to show such a clear expression of community sentiment. Mr Utting further stated, 'The politics of the time have just shone a light on what has always been there. The politics has just flushed it out in the open.'

5.  It is inequitable to pay CEO very large and increasing salaries at a time when others are either losing their jobs or having their wage increases limited
The inequality of paying large salary packages to the CEOs of failed companies that are laying off workers has been stated by a British MP, John Robertson, Member for Glasgow North West, who observed, 'I've got constituents worried about whether they're going to have a job tomorrow, and lots of people are being made unemployed, and they see this man getting his large 700,000 pounds a year pension, and they come to me and they say, "Why can he get that and I can't get a job?"'
It has also been argued that the level of salary received by CEO is completely inequitable when compared to the wages received by a majority of workers. Dr Klaas Woldring, a former Associate
Business commentator Alan Kohler, writing for the Business Spectator, on March 19, 2009, stated, 'It has been plain for years that the law on termination payments [in Australia] 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.'
It has been repeatedly noted that it will be very difficult to have workers accept either a reduction in their wages or the loss of their jobs, while CEOs continue to draw huge salaries.  Ian John Macfarlane, a former governor of the Reserve Bank of Australia and former Chairman of the Payments System Board of the Reserve Bank and Chairman of the Council of Financial Regulators has stated, 'It will make it difficult for some companies to expect responsible outcomes for wages if their boss has just had some massive increase, particularly if it's not particularly well related to the profitability of the business concerned. I can see some tensions building up there.'
There has also been concern expressed that worker resentment at what are perceived as excessively high CEO salaries will result in employees working less effectively in protest. The chief executive of Canadian Tire has claimed companies do not operate in a vacuum and have to consider what society at large thinks. He believes there is a danger that if lower-level employees at the company resent that the "suits" make all the money they will quietly protest by simply doing no more than the bare minimum.

Arguments against reducing CEO salaries and termination payments
1. Moves to limit payments to CEO are politically motivated
It has been claimed that bids by political parties all around the world to rein in executive salaries are an attempt to curry favour with voters.  It has been suggested that governments are only concerned to be seen to be punishing CEOs so that the electors will not  vote against them.
In an analysis published in Alertnet on August 25, 2008,  Sarah Sanderson wrote of the situation in the lead-up to the United States presidential election, 'Politicians from both parties finally appear to be seeing which way the wind is blowing on this one. Last year, a Financial Times/Harris poll revealed that 77 percent of Americans think chief executives "earn too much." And that sentiment has likely intensified in 2008, with one banker after another walking away from the mortgage mess with overflowing pockets.
The presidential candidates have responded to public outrage over bloated CEO pay by promising to boost shareholder power over executive pay packages. Barack Obama is the sponsor of a Senate bill that would grant shareholders a nonbinding advisory vote each year. John McCain has suggested he'd like shareholders to have veto power.'
Similar comments have been made about the efforts of the Australian government to limit executive salaries.  Michael Costa, in an opinion piece published in The Australian on March 27, 2009, stated, 'The problem with the Government's announcement is that it is not motivated by concerns about transparency. It is another childish attempt to blame our economic problems on executive greed. It also is an attempt by a desperate government to extricate itself from its failure to get Pacific Brands to change its decision to move part of its operation offshore.
By linking executive remuneration to class war and broader economic problems, Swan is following in Kevin Rudd's ideological footsteps. Swan asserts that "the largesse of the last decade has been a slap in the face of many working people" and that many recent payments to executives have been viewed as obscene.
It may be true that many people are angry about executive salaries but that doesn't provide grounds for the Government to engage in a general attack on chief executives and the corporate sector.'

2. Moves to limit payments to CEO will reduce corporations' capacity to attract the most able corporate managers
It has been claimed that high salaries allow companies to attract the most talented corporate managers.  It has further been claimed that in a globalised corporate environment, Australia and other nations must offer large salaries to attract the best chief executives the world has to offer.
The Age's political commentator Michelle Grattan noted in an opinion piece published on March 19, 2009, '[Limiting CEO salaries] arguably creates head-hunting problems, whether attracting top talent or undertaking the search.'
Janet Albrechtsen in an opinion piece published in The Australian on March 3, 2009, also noted that  if the Australian Government excessively regulates  corporate salaries it will become very hard for Australian companies to attract talented executives.  Ms Albrechsten argues, 'In a globalised world, talent flows from the area of highest regulation to the least. While some loss of local talent is inevitable because we can never, and should never, match the jurisdiction of least regulation, why make it dramatically worse in return for no real benefit?...
We accept easily the vast amounts paid to golfers, tennis players, rock stars and actors. No one ever whines about the pay discrepancy between a key grip and lead actor. Why do we constantly invoke such meaningless comparisons in the corporate sphere? We should be encouraging our best and brightest to run our most productive enterprises. While it may presently be fashionable to complain about the undoubted mistakes in executive compensation, let's not substitute a system that drives talent out of our key businesses.'
A similar point was made by Michael Costa is an article published in The Australian on March 27, 2009.  Michael Costa states, 'Highly skilled executives command large salaries. Just because governments and sections of the community believe these salaries to be excessive or obscene doesn't mean they are wrong. Morality has nothing to do with it...
The market for chief executives is not the same as the market for production workers.
Many factors explain the growth of executive salaries and the relative decline of production workers' salaries, including their relative supply and demand...'  Mr Costa argues that good CEOs are in relatively short supply compared to workers generally and therefore companies will offer large remuneration packages in order to attract the best corporate talent available.
In an article written for BizTimes.Com, and published on October 6, 2008, Jessica Ollenberg stated, 'CEOs in large companies may have the shelf life of a pro football player, and if we want to attract top talent to these economy-driving opportunities, as a country we must offer a large incentive package. Where publicly traded companies may wish to empower a "celebrity" CEO to drive shareholder confidence, CEOs must be lured from one high-paying opportunity to a higher-paying opportunity. Done well, this creates overall positive economic impact.'

3. CEO are not primarily responsible for the global financial crisis
It has been claimed that it was not the behaviour of CEOs in Australia or elsewhere in the world that created the global financial crisis.  It has further been suggested that the salary packages and termination payments received by CEOs are also not  responsible for the financial difficulties confronting international capitalism.
Herald Sun commentator Andrew Bolt suggested that the origins of the world financial crisis were the unrealistic home-ownership aspirations of many poor people in the United States.  In a comment published on October 16, 2008, Andrew Bolt argued, 'The "greed" that initially created this crisis was of poor people in the US who took out home mortgages they had little hope of repaying. Banks were encouraged to lend them the money by federal laws demanding more lending to minorities, or else, and by the expectation that the US Government would underwrite such lending. It was magnified by many other (greedy) investors, many of the middle classes, who borrowed money to play the stock exchange or to bank on rising property values.'
Similarly, Robert Gottliebsen, in an opinion piece published in The Business Spectator on October 17, 2008, argued, 'Prime Minister Kevin Rudd believes that the big salaries paid in the global finance arena played a huge role in the catastrophe we are now seeing unfold.
On the surface he would appear to be right because all too many chief executives were prepared to take enormous risks to achieve profits and lock in bonuses. Sometimes those risks arose through over leveraging and on other occasions through investing in risky assets and ventures. But if Prime Minister Rudd wants the truth he needs to go back even further and ask why companies appointed these high-risk high-reward CEOs to begin with.
You don't have to look too far to find where at least some of the blame lies: with Mr and Mrs Middle Australia. All of us, and even Kevin Rudd himself, have played an important role in this disaster.
In Australia the superannuation industry is dominated by the demands of ordinary Australians. They demand that managers perform or be sacked. Ruthless but effective. And so every quarter or half year those institutions that fall to the bottom of the performance tables see a huge fund exodus. Accordingly fund managers give the company boards and CEOs the same instruction their clients gave them: "Perform or we will sack you".'

4. Good CEOs deserve the payments they receive
It has been claimed that CEOs perform an important function and therefore deserve the remuneration they receive.   In an article written for BizTimes.Com, and published on October 6, 2008, Jessica Ollenberg stated, 'As CEOs create jobs, impact work-life and stimulate the economy, we should safeguard high salaries to CEOs - as we need to attract top talent there!'
It has been further argued that CEOs deserve far greater salaries than the average worker because their actions have the capacity to affect very many more lives.  
In an opinion piece published in Capitalism Magazine on September 10, 2008, Dr Harry Binswanger stated, 'The mainstream media have reacted with indignation over reports that the average CEO of a large company earns 300 times the salary of the average employee.
In the 1960s, then-Objectivist Alan Greenspan made an excellent point relevant to pay differentials: the issue is the range of action and responsibility that a given position carries. Whether a man on the assembly line performs poorly or well has a narrow, limited effect on the company, but how well the CEO performs affects every aspect of the company, and even its continued existence.'
Dr Binswanger went on to explain further, 'The fate of the whole company lies in the CEO's hands. Only a very, very few people of those who'd like to make the high salary such a job has to carry can demonstrate the outstanding vision, leadership, adaptability, judgment, and integrative ability required.
Another way of stating this is that the CEO of a "large company"-- which is what the claimed statistic deals with--has a lot more than 300 employees, and the CEO is the man in charge of every one of them.'
It has further been argued that companies need to offer larger salary packages to attract innovative CEOs who will foster research and development.  In an article titled, 'The role of innovation in the compensation of American executive leaders, Pascual Berrone, IESE professor, stated in November, 2008, 'R&D tends to be responsible for growth and market dominance to the extent that CEOs must take risks when making final decisions on which projects and investments to undertake. To stimulate the development of innovative projects that render new products, greater efficiency or market control, companies opt for highly attractive remuneration packages. As such, the need for innovation is directly behind the seemingly inexplicable CEO salary spike.'  Thus, it is claimed, forward-looking, R&D-focused executives deserve the salaries they receive.

5. Hostility to CEOs is frequently ill-informed and based on prejudice
It has been claimed that many of the criticisms made about the salaries and termination payments made to CEOs  are based on inaccurate information.  This point was by John Colvin, chief executive of the Australian Institute of Company Directors, in an opinion piece published in The Australian.  
John Colvin stated, 'Some figures bandied about are simply wrong. Departing Suncorp Metway chief executive John Mulcahy was reported to be leaving with a payout of $20 million. It turns out this figure included the total salary he had been paid during six years, leave entitlements and share incentives that he will never receive or are worthless. The actual termination payout figure was about $2 million, a year's base salary.
Departing Telstra chief Sol Trujillo was reported as taking home more than $50 million as a golden handshake, a figure repeated as fact. His actual termination payment was $3million, a year's base salary.
Pacific Brands chief executive Sue Morphet was criticised for awarding herself a pay rise that tripled her salary, then sacking 1850 workers. In fact the increase came because she was promoted from division head to chief executive; her salary was about half her predecessor's and relatively modest compared with that of heads of similar companies. More than half her new salary is rights to shares under short and long-term bonus schemes, much of which are locked up for long periods under vesting arrangements and, at the present Pacific Brands share price, worth a fraction of the value listed in company accounts.'
It has been claimed that many of the calls to reduce CEO salaries are the result of prejudice - a knee-jerk desire to punish CEOs believed to be responsible for the world financial crisis.  On March 23, 2009, on the United States Consumer News and Business Channel (CNBC),  Erik Sorenson warned of the dangers of popular prejudice fuelling an indiscriminate attack on CEO salaries. Sorenson stated,  'I know full well that folks are "mad as hell and (don't want) to take it anymore." Me too. But beware: the non-executive class may not be able or willing to view The Bonus in a sophisticated, discriminating way in this environment. The pitchforks are out and the torches are lit. Really, I get it - but let's hope we don't throw out the baby (bonus) with the bathwater (the real ne'er-do-well's who got us into this mess).'

Further implications
Despite the massive disjunction between executive salaries and and the wages earned by a majority of workers, a disjunction which has grown dramatically over the last twenty years, the issue has only really attracted popular and political attention since the world financial crisis.  
It appears that so long as economies were growing and investors dividends were rising a majority of people were not sufficiently concerned by the size of CEO remuneration and retirement packages to have seen it as an issue.
In an SBS studio discussion on CEO remuneration conducted on April 7, 2009, Tess Lymberatos, a shareholder, stated, 'I have no problems with their salaries provided they're doing their job and they're bringing me money in... I have no problem... If I'm getting my investment coming through, not a problem, I have no problem what money they get.'
It would appear that the current debate is not essentially about equity issues, that is, what it is fair for one person to be paid in relation to another.  It may also not  really be a question of payment for performance, as CEO salaries have grown in a way that does not appear to be closely tied to the relative performance of the executives concerned. In the same SBS discussion Dean Paatsch stated, 'If paying the most gets you the best that means ... that the CEOs of the insolvent US banks were the best management teams of all time. The two things don't necessarily go together.'  (Dean Paatsch is a former lawyer and super fund executive who heads a proxy advisory group, Risk Metrics.)
Why payment for CEOs has become an issue within Australia and overseas appears to be in significant part a desire to punish corporate leaders for the difficulties of the world financial system.
On December 2, 2008, looking at the situation in the United States, Craig Steiner wrote on the Common Sense American Conservatism site, 'In a classic demonstration of ... style over substance, the CEO of Ford has promised to sell Ford's corporate jet and take a salary of $1 ...
Ford Motor became the first of the three U.S. automakers to unveil its turnaround plans to Congress Tuesday, but the plan contained little in the way of new cost cuts or other changes beyond what the company had previously announced.
This is inherently a symbolic move made to appease a symbolic media and symbolic politicians that are more interested in focusing on irrelevant CEO perks - and punishing CEOs - than addressing the real problem. As the article itself says, there was little else in the proposal in terms of cost-cutting.'
What is concerning is that Governments worldwide do not mistake punishing CEOs for reforming their nations' economies.  Reforming the economies of the world is likely to involve more than reducing the salaries of chief executives.

Newspaper items used in the compilation of this issue outline
AUST, March 4, page 12, comment by Janet Albrechtsen, `Right's crazy class war on CEOs'.
http://blogs.theaustralian.news.com.au/janetalbrechtsen/index.php/theaustralian/comments/rights_crazy_class_war_on_ceos/

AGE, March 4, page 15, comment (with Spooner cartoon) by Shaun Carney, `Greed without end'.
http://www.theage.com.au/opinion/greed-without-end-20090303-8nd8.html

AGE, March 3, page 5, news item by Michelle Grattan, `Costello backs strings on taxpayer help for firms'.
http://www.theage.com.au/national/costello-backs-strings-on-taxpayer-help-for-firms-20090302-8mfd.html

AUST, March 2, page 9, editorial, `Pointless paying out on Pacific Brands'.
http://www.theaustralian.news.com.au/story/0,25197,25123773-16741,00.html

AGE, March 2, page 3, news item by Tim Colebatch, `Executive pay sideshow to looming reality of economy'.
http://www.theage.com.au/national/executive-pay-sideshow-to-looming-reality-of-economy-20090301-8lhd.html

AUST, March 5, page 12, comment by John Colvin, `All at sea over CEOs'.
http://www.theaustralian.news.com.au/story/0,25197,25139585-7583,00.html

AUST, March 5, page 5, news item, `Fat-cat pay "untouchable"'. (caution: link goes to PDF scan of original page. Adobe Reader needed)
http://www.agforceqld.org.au/pdfs/MediaReleases/2009/03%20Mar/Aus%205-3-09a.pdf

AUST, March 19, page 1, news item by Matthew Franklin and Richard Gluyas, `Excessive pay in the eye of shareholders'.
http://www.theaustralian.news.com.au/story/0,25197,25208496-5013871,00.html

AGE, March 19, page 12, comment by Michelle Grattan, `Pay limits popular but problematic'.
http://business.theage.com.au/business/pay-limits-popular-but-problematic-20090318-9277.html

AGE, March 19, page 1, news item (cartoon) by Katherine Murphy, `Business fury at moves to limit payouts'.
http://business.theage.com.au/business/business-fury-at-moves-to-limit-payouts-20090318-926g.html

H/SUN, March 17, page 25, comment by Robyn Riley, `Cheeky, greedy beggars'.
http://blogs.news.com.au/heraldsun/robynriley/index.php/heraldsun/comments/cheeky_greedy_beggars/desc/

AUST, March 14, page 14, editorial, `Capitalism no crime'.
http://www.theaustralian.news.com.au/story/0,25197,25183426-16382,00.html

AGE, March 25, page 21, comment by Shaun Carney, `Bosses should have their pay frozen as well'.
http://www.theage.com.au/opinion/bosses-should-have-their-pay-frozen-as-well-20090324-98yw.html

AGE, March 24, page 4, news item (with cartoon) by B Schneiders, `Wage freeze call for 1.3m low-paid'.
http://www.theage.com.au/national/wage-freeze-call-for-13m-lowpaid-20090323-97hh.html

AGE, March 23, page 10, comment by David Burchell, `Executive pay not just about money'.
http://www.theaustralian.news.com.au/story/0,,25225608-7583,00.html?from=public_rss

AUST, March 20, page 13, editorial, `Mr Swan's stunt dive'.
http://www.theaustralian.news.com.au/story/0,25197,25212391-16382,00.html

AGE, March 20, page 12, editorial, `Companies need to heed the anger on executive pay'. (Online version: scroll down page to SECOND editorial)
http://www.theage.com.au/opinion/editorial/health-ministers-denials-are-becoming-a-sick-joke-20090319-937z.html?page=-1

AUST, April 1, page 13, editorial, `Pay for performance'.
http://www.theaustralian.news.com.au/story/0,25197,25271778-25209,00.html

AUST, March 27, page 12, comment by Michael Costa, `Wayne's war on CEOs won't fix the economy'.
http://www.theaustralian.news.com.au/story/0,25197,25247675-5013479,00.html

H/SUN, April 7, page 22, comment by Susie O'Brien, `We can always budget for the greed of bosses'. (Online version has slightly different title)
http://www.news.com.au/heraldsun/story/0,21985,25300212-5000117,00.html