Right: Wall Street executives and company CEOs have been blamed for the world economic crisis, but do the calls to rein in executive packages, salaries and bonuses really offer any sort of solution to the current troubles?. 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.