Outrageous corporate salaries

The issue of outrageous corporate salaries becomes worse and worse.

It has long spread across the English-speaking world to New Zealand and is clearly evident in Dunedin.

For most people, one might say the 99%, further revelations about the staggering salaries at Dunedin City Council-owned Delta are disappointing and disheartening.

To all those on close to the minimum wage of $15.25 an hour as well as to the relatively well-paid middle class — the teachers, nurses, police — the figures are bewildering. 

How can it be  the chief executive of Delta earns a package of $560,000 to $570,000? 

How is it that  five staff earn between $210,000 and $310,000 and a total of 88 more than $100,000? 

How is it the number on more than $100,000 is 26% up on the previous year. 

How is all that possible when Delta has hardly covered itself with glory in recent times.

The reaction from Delta’s chairman was predictable. 

Its executive salaries were "market-based" and it paid "bench-marked salaries to attract the right people".

That is what they all say as pay ratchets upwards, soaring further and further from the rates of those in the "lower" echelons.

Once, executive pay was frequently built on what those staff  were paid.

Now, consultants advise on chief executive’s remuneration. 

That, then, creates a level from which other senior executive salaries can be tiered.

No-one should deny fair compensation to those charged with running large companies or organisations  Reactions to employees earning several thousand dollars a week should not be based on resentment or jealousy, and chief executives  can make a big difference to business profits.

But higher executive pay is out of kilter. 

It fosters mistrust in business.

It demotivates other staff. 

It reinforces inequities and it can remove executive staff from understanding and empathy with others.

It can dislocate them from the feelings and concerns of the business’ customers and their own staff.

The high salaries and the benefits these bring promote a sense of entitlement, even arrogance, rather than performance. 

The elevated pay and position is soon  taken for granted, and does it really lead to much better performance?

Supposedly, the free market dictates salaries. 

But, essentially, a  corporate class looks after itself.  

Directors’ pay looks less excessive if CEOs are paid a fortune.

The recruitment agencies and their commissions benefit from higher salaries. 

Other consultants come from the same milieu. 

Benchmarks can be skewed, even if subtly or without overt intent, and so salaries leapfrog.

This then spreads to the public service, and  to MPs. 

The "independent" Remuneration Authority is, again, drawn from the same privileged slice of society. 

The underlying interests of its members, and their own pay and position, is to recommend increases.

There are no easy answers to breaking the cycle, even if there is little evidence large financial incentives attract the best talent.  

Tying CEO salaries to multiples of average company wages or multiples of the lowest paid are crude measures which bring their own sets of difficulties.

Meanwhile, elite corporate salaries soar.

In Delta’s case, the chief executive’s salary package is 80% higher than the previous head when he left in 2008 after a successful tenure. 

The CPI increase from the middle of that year until the middle of this year has been only 13.5%.

Perhaps shareholders, and that would have to include institutions which hold large proportions of companies, could pressure company boards more about the salaries.

For Delta, the council on behalf of the residents and ratepayers is the shareholder.

If companies could show that jumping off the executive pay escalator does not harm business, others might follow.

But, unfortunately, it is difficult to see much changing.

Minds exercised  in many places have failed to come up with ways of preventing this outrageous pay inflation.

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