When clothing manufacturer Pacific Brands announced in February last year that it would be moving offshore and sacking 1850 workers, people were clearly angry. But when it came out soon after that Pacific Brands chief executive Sue Morphet would have her pay increased from $685,775 to $1.8 million that anger turned into outrage.
Even Kevin Rudd could not stand by and support someone rewarded for decimating so many jobs. Especially when the company had received government handouts and Rudd himself had been blaming “extreme capitalism” for the onset of the economic crisis.
At the same time anger was sweeping the world over the greed of the ‘banksters’ and the CEOs. After governments launched the biggest bailout in history to save the financial system from collapse, people were asking why they should be asked to pay for crisis that they did not create. If workers were going to be asked to accept job losses and have their pay capped, it seemed only fair that CEOs have a cap put on their largess.
In an attempt to put a lid on this anger Rudd joined with other world leaders and pledged to crack down on executive pay. The government set up a ‘Productivity Commission’ inquiry into executive remuneration and in January 2010 it delivered its findings.
When the representatives of big business investigate their own masters you can never expect too much. But most people would have at least expected the CEOs to get a slap on the wrist. Unfortunately, while the findings were damming, the inquiry’s 17 recommendations were more akin to a playful tap with a feather duster.
The report found that the chief executives of the top 20 companies were paid an average $7.2 million last year – 110 times the average wage. Executive pay inflation has been extreme with top CEOs’ earnings more than tripling since 1993. At the same time pay rises for ordinary people have struggled to keep up with inflation.
Despite this, the final report does not support caps on executive pay or even call for regulation of their remuneration. It only suggests that salaries be set by ‘independent committees’ and calls for shareholders to be given a slightly increased say over the pay of directors. Allan Fels, a co-author of the commission’s report, acknowledged that the findings were watered down in response to complaints from big business.
With all the hype about economic recovery, Rudd may be able let the big end of town off the hook this time. But this is an issue that will come back to haunt the government. The underlying problems of the economic crisis have not been solved and any recovery will certainly be weak and accompanied by more unemployment. There is still a real possibility of a double dip recession.
People will not be prepared to accept a continual reduction in living standards while the bosses continue to live extravagant lifestyles. It is only a matter of time before another big company, with an overpaid CEO, wants to sack staff. Not only will the outrage return but at some stage people will start to realise that there is more to the problem than just the individual greed of the bosses.
Inevitably, during the early stages of the economic crisis people have been blaming the CEOs and the ‘banksters’ for all the problems. Undoubtedly these people deserve scorn, but at root, the economic crisis was not just the result of the greed of individual bosses. The crisis flows from the contradictions of a system that puts profits before all else. As long as capitalism remains nothing will be able to fully check the greed of the bosses.
Only by nationalising the banks and the big companies that dominate the economy will it be possible to begin to introduce measures which benefit the mass of the population and not just a rich few. In the meantime socialists call for big companies to open their books to show where all the profits are going.
The reality is that ordinary people have no incentive to support a system that rewards the bosses with profits and bonuses while they deliver job losses, cuts and higher interest rates. This is why socialists campaign for an entirely different way of running society – one that puts people’s needs before profits and where obscene executive pay would be a thing of the past.
By SP reporters