As Australia enters a recession, one of the country's favourite pastimes has begun. Boss bashing has started in earnest. The government, the opposition and the ACTU have all demanded that something must be done.
Executives paying themselves bonuses while at the same time sacking thousands of workers conjures up images of the worst excesses of capitalism. The public's frustration is obvious as executives with million-dollar bonuses beg for government assistance. In this kind of environment it's easy to demand something be done. However, deciding exactly what should be done is no easy task.
There are three related, but separate issues at stake. The first is about the level of salaries paid to executives who are shedding staff. The second is about the level of salaries at companies being bailed out by the government. And the third is about the level of executive salaries generally.
The sacking a week ago of 1850 workers at Pacific Brands triggered the latest outpouring of moral indignation. What seems to have particularly galled callers on talkback radio was that the chief executive got promoted and therefore got a pay rise in the midst of mass redundancies. But cutting the chief executive's pay wouldn't have saved those workers' jobs. It was globalisation -- not the size of the CEO's salary -- that cost the employees of Pacific Brands their jobs.
Presumably, if the company had gone cap-in-hand and begged the federal government for further subsidies and more tariff protection, and if the company had got what it wanted, no one would have begrudged what the CEO earned. If such entreaties from the company had succeeded, the CEO would probably have been lauded as a hero in much the same way that bosses of car companies are whenever they manage to keep their Australian factories open an extra year after extracting a few hundred million dollars more from taxpayers.
The argument about the costs and benefits of free trade is entirely different from the discussion about executive salaries. Whether underwear should continue to be made in Australia when it can be imported at a fraction of the price has been lost in the debate.
On the surface, the demand that the government regulate the salaries of executives of companies receiving taxpayer assistance seems not unreasonable. The argument is that bail-outs to banks and car companies are intended to keep the companies afloat and their workers employed. Handouts shouldn't be bonuses to the executives who allowed their companies to go broke in the first place.
This is all fine in theory, but where do you draw the line? There's hardly a company in the country that doesn't receive some sort of handout, benefit or advantage from the government.
Just this week the former governor of the Reserve Bank of Australia, Ian Macfarlane, admitted the obvious fact that the "four pillars" policy reduced competition between the Big Four banks. The result of this lack of competition is that the banks' profits were boosted and bonuses to bank executives went up commensurately. Taking the point about government bail-outs to its logical conclusion, if part of the reason for bonuses to bank executives is because of government policy, isn't the government therefore entitled to have a say in the size of those bonuses? And the list of such examples could go on, and on, and on.
If the government limits the number of free-to-air television channels, should the government therefore set the salaries of media executives?
Because the government decides who can and can't fly into Australia should the government therefore have the right to decide what the bosses of Qantas and Virgin Blue are paid?
And what about industries that exist only because of government subsidies and regulation? Should the government decide the wages at companies making solar panels and firms operating wind farms? A bail-out is a bail-out regardless of whether it is to a bankrupt company or a profitable company. To set the salaries at some companies getting bail-outs but not at others is cheap populism. Worse, it's hypocritical.
At the moment company bosses, particularly bank bosses, are bearing the brunt of the blame for the current crisis. Some of the blame is warranted. Failed executives paid enormous bonuses are an easy and obvious target for retribution.
But, for once, the fault is not with government. Executive remuneration is set by the company's owners -- not the government. If shareholders are looking for someone to blame for exorbitant executive salaries they should look in the mirror.
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