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Is Swan correct to curb “obscene” exec pay?

18 March 2009

COMMENTS

Yes, after all they are just another employee of the company.  Read all comments »

Do you support treasurer Wayne Swan’s new clampdown on excessive executive payouts?

Under Swan’s forthcoming new law, shareholder approval will be required for termination payments of more than one year’s base salary. Is this a sensible suggestion, or needless government intervention?

The treasurer is on a mission to stop over-the-top golden handshakes, which he thinks are "obscene''.

Is the banking sector more guilty than most in giving large payouts to the dud execs who helped cause the current financial crisis?

And isn’t one year’s wages more than enough anyway? Give us your thoughts on termination pay.

COMMENTS

Paul, Information Services,  Wed 18 Mar 09

There are too many recent examples of large termination payments following poor performance.

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Jakie, Information Services,  Wed 18 Mar 09

The excessive banking payments apply more in the USA than here - it's Obama, not Swan, who's doing the real cracking down

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Shareman, Information Services,  Wed 18 Mar 09

Shareholders will have to get more active if this new is going to work.

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Rusty, Global Custody,  Thu 19 Mar 09

Yes after all they are just another employee of the company. And a ratio of their pay based on the average pay is fair limit. Coporations have paid a barrow load out to execs because of the 'pay peanuts you will get monkeys' view. Well they paid a kings ransom and still got monkeys, perhaps they should pay peanuts and then they might get real performers

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denko, Research,  Thu 19 Mar 09

There are important regulations needed to address in the Global Economic Crisis/Meltdown.

Executive pay levels were never and are not the proximate cause.

Yet for many lower income earners - who often have no insight into why the valuie of their house has colllapsed, their 401(k) or super fund has shrunk and their current job and bonus is at risk - are outraged and SOMEONE has to be to blame...

That sense is so pervasive - that politicians playing to the outraged gallery - must find a responsible person, body or  corpse.

Yet executive salaries are a relevant sympton of past shareholder lethargy - a lethargy that goes to the current crisis.

The large proportion of shareholders are funds whose asset managers vet the postion of their funds based on the statistical performance of an equitry against the stated objective of their funds asset allocation.

Not only do these asset managers not care what the internal administration, or executive reimbursement  structure is - they simply do not know. The corporate financials are not read or analysed by this  asset manager - less the particular long winded and  droll verbiage in the AFS on executive compensation.

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James, Investment Banking / M & A,  Fri 20 Mar 09

Sure - I think it is right that shareholders have some say over how much key managementn is compensated. Personally, I am not a big fan of termination payouts though am very ok with performance bonuses and golden hellos.

Presumably the CEO was being terminated because he was not doing a good enough job in the eye of the Board or did not get along with them.  Hence, why does he deserve a golden handshake (in the end though it raises genuine issues to consider if the CEO was being terminated due to something else e.g. internal politics).

The problem with this public company compensation issues is being very detailed about perforomance hurdles (or at least showing some transparency as to what those hurdles are). Public companies have a lot to learn from private equity run companies in terms of senior management compensation (they are usually quite prescriptive in their management incentive schemes with co-invest). But alas - the public gravitates towards the average - and what you end up with is average performance.

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Adam Smith, Investment Banking / M & A,  Mon 23 Mar 09

Hands off you socialist, we earnt it!

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Ben, Accounting & Finance,  Tue 07 Apr 09

This is probably not a bad piece of government legislation, however as a general rule it is shareholders, not governments, that need to have the determining say on executive pay.

This would have huge implications, as many remuneration packages are currently being voted down at AGMs in Australia. These votes are at the moment non-binding -- to allow them to be binding upon companies could lead to substantially reduced executive remuneration.

However, it is only by this method that you will have pay appropriately linked to each individual company, within each specific sector -- it would become overly messy for governments to try to allow for all these nuances in their legislation.

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