The idea of the mandatory disclosure of a CEO pay ratio for every listed Australian company is just starting to emerge on the Australian political and corporate scene, as the ALP pushes a requirement for all listed Australian companies to reveal how much the CEO is paid compared to the average wage of the company’s median employee.
This is an American idea that started after January 2017 and is now a commonplace disclosure in the proxy statement for annual meetings (similar to the notices used to list the issues for company annual meetings in Australia).
The idea emerged out of the fallout from the Global Financial Crisis and proved mildly controversial at first, but has faded as an issue only to resurface when a high ratio is revealed. However the idea has opponents in American business, and it will no doubt be the same in Australia, with media mates of those moaning corporates hopping on the bandwagon (no doubt led by News Corp’s Australian papers, with The Australian in the vanguard).
Why News and the Oz? Well the pay ratios for the CEOs of the two companies are a bit close to home and a bit rich.
Men of the people
At the Murdoch-owned 21st Century Fox the latest proxy statement discloses the CEO pay ratio for James Murdoch (who earned US$50.2 million in the year to June 30 in cash, shares and the awards) was, wait for it, 741 times that of the median Fox employee whose compensation was set at US$67,809.
Lachlan Murdoch, who was paid a total of US$50.4 million, had a similar ratio (he is co-executive chair, which is not covered in the rules, only the CEO), while dad Rupert’s ratio would have been closer to 700 times that of the median pay of a Fox employee.
The compensation for the median Fox employee of US$67,809 doesn’t seem very much for such a rich and powerful company with film, TV and cable news operations. But there is an explanation for that — many of the high-profile stars of screen, TV and cable news are contractors and not employees.
Over at News Corp, the CEO pay ratio for Robert Thomson — who was paid a total of US$12.97 million in 2017-18 or around A$17 million, making him one of the highest paid CEOs of a company whose shares are traded on the ASX — was a more modest 234 to 1. The compensation of the median News Corp employee was US$55,475 or A$78,024.
In fact, in something of an irony, Robert Thomson is a bit of a pioneer — his pay ratio was the first ever for the CEO of a company in Australia (News is a US company) whose securities are traded on the ASX. The highly-paid editors at The Australian and the company’s tabloids will now surely take a close look at their own pay ratios and Thomson’s and wonder at the disparity.
As a comparison point, the compensation of the median Amazon employee was US$28,446 last year. CEO Jeff Bezos had a pay ratio of only 59 times that salary. You might say that he has mega wealth because he owns 16.4% of a company worth more than US$900 billion.
The Murdochs control 39% of the voting shares in Fox, which paid 36 US cents a share last year and News Corp, which paid a total of 20 US cents a share. Amazon doesn’t pay dividends. If Bezos can get by with a ratio of 59, then why can’t the Murdoch men (with the added bonus of the flow of dividends into the Murdoch family trust)?
As bad as the gap between indolent CEO’s and the workforce is, our own Assistant Treasurer and best bud of Morrison is racking up 2 grand a month in data usage from his home…on the taxpayers wedge of course.
Mysteriously much of the data usage occurs at times that Roberts is not in fact in residence…..Must be a leaky pipe or some such thing.
Boys and girls, prosperity theology is rampant. The age of entitlement is back but only for lifters, not leaners. Be aware that if you have a go, you’ll get a go, many gigabytes of a go.
Roberts claims there’s a connectivity problem where his residence is located. What a pity his colleagues implemented a dud NBN rather than the Rudd version which guaranteed everyone a superior service.
I really can’t understand why these people need so much money….surely so that your company improves & attracts the right sort of employees, wouldn’t it be better to offer more incentives to employees…CEO’s & those at the top level of these types of corporations really don’t need to be earning that much, if they are getting shares in the company as bonuses, as that on paper would be a huge incentive & profit to them anyway (also more likely to get a better tax break)…surely it would make more sense, that they pay them a smaller percentage say 30-35x the average (so as to attract & retain talented individuals) & if they decide to leave the company they can get a pay out in line with the actual promotion & improvement (that can actually be attributed to them), which they have done…. while being employed in that position….also the company can buy back the shares as part of the exit process… I would suggest this would maybe stop the leaner’s moving into these positions & maybe be less inclined to take on a CEO’s position, knowing that their being watched & assessed…
the business with Roberts…he’s using the connectivity issue to bail his sinking ship out…I can’t believe he would put himself in that position..all he needs to do is contact his provider & get a better more appropriate gig amount for his household…interesting how it turns out that it happens when he’s not home..maybe the mice have figured out how to use his home computer..lol
Is it a bad thing anymore, to have the Murdoch Hounds baying after you?
Mate, News Corp would attack Labor if they said water is wet. You don’t need to “keep an eye” on the News Corp papers to know they’ll attack a Labor plan.
Absolutely correct, Arky.
I suggest the ALP and their supporters just ignore News Corp and their ‘fake news’!!
There’s no way either Lachlan or James Murdoch is worth US$3M more annually than Judge Judy.
I remember reading some research as a student in the 70’s that purported to show that a competitive capitalist society needed a pay differential of only 9:1 to maintain sufficient incentive. So if a minimum wage in Australia is roughly $40,000 pa, then anyone (and everyone) getting over $360,000 is a leaner on welfare.
Disclosure is not enough – shareholders urgently need a legislated cap on TOTAL CEO remuneration as a ratio of the lowest paid 100 employees in every public company. Historically the ratio was about 13 times, so legislating a cap of 40 times should not be too much of a political challenge for Labor. How many CEO votes would that cost Labor? None, of course. And how many shareholder votes would it gain? HEAPS!
I am a swing voter, and if Labor offered to legislate this I would DEFINITELY vote for them at the next election.
P.S. Then watch the minimum wages of public company employees go up!