SALARY caps are not the answer to tackling excessive executive salaries, according to a new report, but the Rudd Government should introduce laws strengthening the role of shareholders in determining pay.
The Productivity Commission today released its proposals for change, including a "two strikes, you're out policy" forcing boards to face re-election if they fail to act on shareholders' concerns on executive pay, reports The Australian.
Executive pay grew by 250 per cent in real terms since 1993, before falling in 2007-08, the commission found. Among the top 20 CEOs, the average pay is $10 million a year or 150 times average earnings.
But it's a different story among the smallest 100 companies, where pay averages $180,000 or just three times average weekly earnings.
While the Greens are calling for a $5 million salary cap for executives, Financial Services minister Chris Bowen rejected the idea today.
"We don't live in an economy where the Government can come in and put a cap on executive remuneration but what we can do is ensure that the right signals are in place," he told ABC radio....
In a draft discussion paper on Executive Remuneration, the Commission's chairman Gary Banks has also concluded that "the way forward is not salary caps, which would be unworkable and have harmful economic impacts".
"Rather, regulatory and corporate governance reforms are needed to strengthen the integrity of pay setting by boards and ensure that they engage effectively with their shareholders," he said.
The commission's reform plan includes barring executives from sitting on remuneration committees, requiring pay consultants to report to boards independent of management and banning executives voting their shares and any undirected proxies on pay issues.
Mr Banks said the strong growth in pay had as much to do with the strong growth in the economy in the last decade but conceded there had also been “episodes of excess and poor pay practices”.
“Some pay outcomes, particularly the more egregious cases of `rewards for failure' appear inconsistent with an efficient executive labour market and could reflect weak or complicit boards,” the commission says.
The Australian. - AAP30 Sep 2009
These people at the TOP of the financial food chain are part of the elite 'boys club' in Freemasonry.
Their peers are Law Makers, Politicians, and other people place highly in the socio-economic scale.
Their 'friends' will NOT make laws to their detriment.
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