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Issue 13: Millionaire CEOs and the myth of merit

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From the editorLast week’s Extinction Rebellion protests made a lot of people upset. The Courier-Mail
 

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October 13 · Issue #13 · View online
Your weekly wrap of national affairs, society, culture and politics, published by UnionsACT.

From the editor
Last week’s Extinction Rebellion protests made a lot of people upset. The Courier-Mail, my home-town paper, spilled gallons of ink in furious indignation about the Brisbane protests, wheeling out the usual tired anti-activist cliches and accusing them of risking lives, wasting resources and being generally unpleasant.
Some activists have expressed concern about XR’s tactics, and I don’t think those concerns are not without merit. Electorally, this might be counterproductive to the broader climate and environment movement. But when democracy no longer functions to serve the interests of the people, what are the people left to do? Certainly, unions from NSW to WA are fighting back against the spate of anti-protest laws being proposed.
If you’re a new subscriber, welcome to the gang. And if you’re a new Solidarity Subscriber, thanks for spending some of your hard-earned money on keeping this project going.
Enjoy the issue!
Guy Mosel, Editor

Millionaire CEOs and the myth of merit
by Guy Mosel
If you were getting paid half a million dollars a week you’d be grinning like this too.
Qantas CEO Alan Joyce is officially Australia’s highest-paid chief executive, pulling in $24 million in 2018, about 280 times the average full-time salary.
Joyce, who claimed credit for “the biggest turnaround in corporate Australian history”, defended the obscene sum, saying “our shareholders did exceptionally well out of it”.
And indeed they did, which is to be expected when your company is “the biggest tax avoider in Australia” and the first time you paid tax in a decade you coughed up $4 million on $1.6 billion in profits (that’s one quarter of one per cent). Joyce wouldn’t even get out of bed for that.
This “turnaround” has not only come at the expense of government coffers, it’s also been thanks to the slashing of 5000 jobs and a four-year wage freeze that has penalised thousands of Qantas workers for managerial incompetence and global economic forces.
Joyce, who – shockingly – is a major supporter of corporate tax cuts, supplanted Domino’s CEO Don Meij at the top of the rich list. Meij last year took home $36.8 million (he pocketed a paltry $7 million this year).
Meij’s Domino’s, like Joyce’s Qantas, is also averse to paying tax and has a similar attitude towards the working class, with systemic wage theft rampant in stores across the country.
It’s almost as if rewarding a small group of (mostly white, mostly male) elites for dodging tax and robbing workers is… just something that companies do?
The rich get richer…
CEO pay and bonuses continue to surge while workers’ wages stagnate and employment is increasingly precarious. An Australian Council of Superannuation Investors report found that the average realised pay across ASX100 CEOs was $5.66 million in 2018, with the median bonus, $1.6 million, the second highest in their survey’s 18-year history.
Unsurprisingly, handing over bags of cash to executives is an unpopular practice. Eighty per cent of Australians say CEOs are paid too much, and that the ideal CEO-to-worker compensation ratio should be 8.3. In other words, for every dollar you or I earn, the chief executive should take home $8.30. On that basis, if you kept CEO salaries the same, average Australian workers should be earning about $500,000.
Reserve Bank boss Philip Lowe is also unimpressed:
“As a regular Australian [who, it should be noted, earns a not-too-shabby $903,000 a year - ed], it disturbs me. Some people who are paid extraordinarily high amounts of money and working Australians have relatively low wages and getting small wage increases, I think it’s an issue for the society.”
"An issue for society” is certainly a polite way of describing the problem. These exorbitant salaries and bonuses have real-world impacts on income equality. As share price-based performance bonuses have become a feature of remuneration packages, executives are now rewarded for producing bumps in stock prices by slashing work forces and cutting costs. This is precisely how Alan Joyce has enriched himself.
Of course if I was saying all of this on The Drum some IPA talking head would pipe up right now with something about “merit” and “incentives”.
So let’s talk about that briefly.
First of all, merit is bullshit. You know who believes in merit? Rich people. As one management expert puts it:
“What may be a downer to some is the fact that most CEOs aren’t that exceptional. Although they may imagine that their skills are in scarce supply, many are quite ordinary, fallible human beings who have only a limited impact on their companies. To replace them is not an impossible task. After all, every year, worldwide, business schools crank out hundreds of thousands of MBAs, many with sights on a CEO’s office.”
As for the idea that there is a clear link between obscene pay packets and long-term corporate performance, the evidence is weak at best.
And the notion that excessive CEO salaries are some kind of locked-in, market-mandated thing that we can’t do anything about is also bullshit. As economist Jason Murphy says, “High CEO pay is a choice.”
Japanese CEOs, for example, earn on average of one-tenth of an American CEO salary – should we therefore assume they are only 10 per cent as accomplished or 10 per cent as motivated? As outgoing Shell boss Jeroen van der Veer famously put it 10 years ago:
“If I had been paid 50 per cent more, I would not have done it better. If I had been paid 50 per cent less, then I would not have done it worse.”
Can anything be done?
Yes: overthrow capitalism and seize the means of production.
Failing that, there are certainly some proposals on the table worth considering. Three-quarters of Australians support a cap on CEO pay packets, with most saying $720,000 or year or less is a reasonable salary.
Labor introduced a policy in 2017 that would force companies to reveal the ratio of CEO pay to the median worker salary, and they’ve also had internal debates about introducing a “Buffet Rule”, which would ensure all salaries above a certain level would be subjected to a minimum effective tax rate. The Greens have already adopted this as policy
Bernie Sanders, meanwhile, has proposed an “income equality tax” which would incrementally increase a corporation’s tax rate above certain CEO-to-worker salary ratio thresholds.
They’re all ideas worth exploring if the inequality trend is to be reversed. Just don’t expect them to gain any traction while the IPA and Business Council are pulling the government’s strings.
Read more
This piece, “Why everybody knows CEOs are overpaid, but nothing happens”, is a link-heavy deep-dive into the structural reasons behind CEO overpayment that’s worth your time.
The UK Trade Union Congress has a range of executive salary policies, including one that would require worker representation on corporate remuneration committees.
How much more than you does the average CEO get paid?
In other news...
Good bedfellows The Guardian reported last week that Scott Morrison is chummy with a QAnon conspiracy theorist. Jeff Sparrow says there is a deepening link between conservatism and conspiracy, especially of the climate-denying kind.
Labor can’t make its mind up on climate With Joel Fitzgibbon advocating adopting the Coalition’s climate policies (such as they are), and Richard Marles calling the party’s Adani messaging “clumsy”, Labor remains riven by indecision on climate. Russell Marks suggests that a lack of “sustained analysis of class, capital and the state” is at the root of the party’s problems.
Making work safety a priority In National Safe Work Month, this piece highlights ACTU data revealing nearly 80 per cent of Australian workers had experienced injury or illness as a result of their work in the past 12 months, and argues that more must be done to keep us all safe at work.
Impeachment edges closer As Trump’s presidential clown car careens towards the abyss, the White House’s stated refusal to cooperate with impeachment proceedings is evidence that they know they’re losing the fight.
Pro sport’s performative wokeness The National Basketball Association, America’s professional basketball league, is often celebrated for its liberalism, but the controversy around a pro-Hong Kong tweet posted by one of its teams’ general managers is a reminder that capital, no matter how “woke”, is still all about the money.
KAK: still a racist Celebrity racist and bigot-for-hire Kerri-Anne Kennerley was, according to some reports, “cleared” of racism by the media watchdog over comments made on Ten’s Studio 10 program in January. Except she wasn’t, as Nat Cromb explains.
Kurds left to fend for themselves Turkey’s invasion of Northern Syria is intended not just to end Rojava’s seven-year experiment in radical democracy, but to extinguish Kurdish aspirations of self-government for good. British Unions have urged the government to intervene.
Coming up this week
The House and the Senate both sit again this week. There are only four sitting weeks remaining this year for each chamber.
Meanwhile in Queensland, fast-tracked legislation to crack down on protestors will be debated in parliament.
Longreads
The Ezra Klein Show - When meritocracy wins, everybody loses
“This is the next East Timor”
The myth of inevitable technological progress
How group psychology is driving global political turmoil
For your bookshelf
The Meritocracy Trap
Are Chief Executives Overpaid? by Deborah Hargreaves
Priests de la Resistance! by The Reverend Fergus Butler-Gallie
The Finance Curse: How Global Finance is Making Us All Poorer, by Nicholas Shaxson
Finding the Heart of the Nation, by Thomas Mayor
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