Not since Hockey and Cormann toasted an austerity budget with two fat Cuban cigars has a symbol of elite aloofness been so universally reviled as Australia Post CEO Christine Holgate gifting four employees Cartier watches worth a combined $19,500 to reward their performance on a banking deal. Right before the AFL Grand Final, she served up a loathsome barbecue stopper.
Holgate is not the only government agency head in hot water for wasteful extravagance. ASIC boss James Shipton recently stepped aside over taxpayers footing the bill for the handling of his tax affairs.
NBN Co and Snowy Hydro have also recently doled out multi-million dollar executive bonuses “in order to remain competitive and attract and retain critical talent”.
What makes these incidents particularly galling is the agencies are underperforming during the pandemic. Australia Post customers are facing parcel delays after it changed its delivery methods. ASIC has been accused of complicity in the broken banking culture revealed by the royal commission. I’m sure I could find a pithy example for the NBN if my internet weren’t still buffering.
Scott Morrison is now considering launching an inquiry into top government employees’ salaries, tax arrangements and bonuses. This would provide a welcome opportunity to examine whether heaping bonuses and gifts upon top executives fuels any extra managerial magic, or if it really is as Marie Antoinette as it looks.
To “pre-empt an inquiry”, in classic Spiv-tionary terms, let’s take a look at what we already know.
Big executive bonuses ≠ well run agencies
Top federal bureaucrats’ salaries are set by the Remuneration Tribunal, made up of a fossil fuel executive and a wealthy investment advisor. Before their wages were frozen during the pandemic, the tribunal awarded senior public servants pay rises at almost twice the rate of their subordinates. Their overall salaries are high by global standards and even insiders admit “some of these guys are overpaid”.
Conversely, government agencies with independent boards, often stacked with partisan appointees, can set their own executive rates. This is why Holgate is paid a base salary of $1.4 million, with performance bonuses often taking her pay as high as $2.5 million (which is only a fraction of her predecessor’s whopping pay packet).
The academic evidence on the relationship of overall pay to performance remains contested. There is increasing evidence that private sector CEO pay is “more about white male entitlement than value for money”, but some believe company size and job risk factor in. Furthermore, some plausibly argue that if bureaucratic leaders fall too far behind, the public sector will experience a “brain drain”.
But on “performance-based” bonuses, the evidence is clearer – they rarely work well in the public sector. Griffith University’s Geoffrey Edwards wrote for The Mandarin that performance pay “rewards orthodoxy, not innovation”, by preferencing target-hitting over mission-fulfilling. Anyhow, it is extremely difficult to attribute successful outcomes to top managers when they are so heavily reliant on their teams.
This is why Victoria has axed performance pay for its departmental bosses, and the federal government is using it less and less, especially among the already well-paid. Victoria’s move followed a review suggesting the practice was “ineffective in driving performance”.
Especially when combined with fixed-term contracting, the review found bonuses “tend to support a focus on individual performance within the contract term, compared with collaborative achievement and longer term public service stewardship”.
Morrison, himself a former high-paid government agency head, will likely use these incidents as an opportunity to virtue signal, and perhaps further broad-based wage freezes for hard-working rank-and-file public servants.
But as much as politicians may now denounce this culture, it has been awfully convenient for them. Public servants in insecure jobs, focused on short-term targets, do not deliver the “frank and fearless” advice and service delivery that was once the core role of career mandarins.
Perhaps the political class will wear Cartier-style headaches for the convenience of a compliant and corporatised state.
“Morrison, himself a former high-paid government agency head” – anyone know the reasons for, and the terms of, his departure from from both the NZ and Australian tourism jobs?
Fran Bailey was the Minister for Tourism in the Howard Govt when Scotty was sacked from a Marketing job, but she ain’t telling. Howard would know too but you’d never believe anything he told you.
T of T & DF,
I recall reading this excellent article by Karen Middleton which throws plenty of light on Morrison and his modus operandi.
The fact that his Minister, Fran Bailey, expressed alarm in the weeks before Morrison’s sacking over the way Tourism Australia was handling taxpayers money, should be a wake up call to the rorting of taxpayers money happening on his watch as PM.
https://www.thesaturdaypaper.com.au/news/politics/2019/06/08/fresh-documents-morrisons-sacking/15599160008252?cb=1603682881
I think the Saturday Paper covered his ignominious departure from Tourism NZ somewhere, as well as his departure from Tourism Australia. I think both involved him being secretive and not being accountable.
Correct JMNO
Karen Middleton in an earlier piece in The Saturday Paper who writes-
“The NZ auditor’s criticism of Morrison- who is named in the report – are similar to some of those the Australian National Audit Office ( ANAO ) would make nine years later in its own report examining the management of Tourism Australia.”
Who was it who cut funding to the ANAO who exposed the land rip off at Badgerys Creek at taxpayers expense for the benefit of his cronies?
For the sake of good governance and a strong democracy, a properly constituted Federal Integrity Commission urgently needed!
https://www.thesaturdaypaper.com.au/news/politics/2018/11/17/morrison-hijacked-nz-tourism-review/15423732007158
There’s more going on here than meets the eye. Since when has Scotty from marketing ever showed the slightest interest in pegging back executive remuneration? Or anyone else in the Liberal Party shown interest either, for that matter.
If you want to mount an argument that Australian executives in general, and Australia Post executives in particular, are a bunch of overpaid parasites, I’m with you all the way. That’s not what is being claimed here, though.
In the overall scheme of things as they currently stand, in a corporation the size of AP, $12,000 can almost be covered by a petty cash voucher. The four executives in question could have had their bonuses increased by ten times that value in cash payments and no-one would have batted an eye. And a $3000 watch will be a nice one, but scarcely in the realm of ‘luxury’, even if it does come with a Cartier brand name.
Yet Scotty is ““appalled, it’s disgraceful and it’s not on”.
Something smells a bit off, to me. I don’t think it’s Scotty’s cologne.
Of all the executive bonuses paid out this year these $5K ones to Oz Post were far and away the most justified and earned. The Bank@Post deal was a beauty, and it was hard-won by a tenacious crew of mid-upper bureaucrats grinding it out up the big end of town. They outplayed three out of four of the private sector’s laziest and most complacent billion dollar harvesting machines into paying much more for their ticket-clipping access to a shared public asset than they ever wanted to. Tat the ANZ balked at the deal, to their commercial cost, is a sure sign that our public servants were for once serving the common public good interest with their sleeves rolled up and a bit of fire in their bellies. The process – again, for once – also put a dent in defacto cartel impregnability, and in doing so also (just by the way!) underwrote the continuing viability of a lot of dispersed small businesses, as well as safeguarded egalitarian access for geographically and digitally disadvantaged banking customers.
That a nervous and panicky PM positively swamped in soft corruption crises clutched for this ‘executive outrage’ non-story to grandstand so opportunistically is a miserable but telling measure of how perverse the remuneration landscape and debate has become. Personally, I distrust the entire concept of performance pay, especially for executives on good living salary packages without it. Expecting ‘extra’ simply for doing your job well is, really, a wee bit of a try-on. But the private sector is at least broadly inured against excessive moral hazard, since however imperfectly, bonus payments there are ultimately anchored in continuing viability and profitability outcome-metrics. The trouble of course starts with the blending of profit/non-profit remuneration structures, and that genie is long out of the bottle. The structural flaws now extend beyond simple performance pay arrangements for those in the latter sectors, into all manner of Frankenstein pick-and-choosing. The over-arching rote justification for paying those in secure, well-regulated jobs as if they are swashbuckling, empire-building entrepreneurs – the need to ‘attract talent’ by offering ‘competitive packages’ blah blah – is just hustling garbage, which willfully disregards the immense non-remunerative benefits of taxpayer underwritten employment. If the COVID shutdown that’s just devastated the private sector – at executive levels as much and probably more than most – has starkly (re)-illustrated anything at all, it’s the supreme value of…a guv’mint job.
Excellent comment. It answers the question of what Holgate’s team delivered to “earn” their watches.
I live in a community that lost its privately owned local PO due to its being non-viable. We are now required to travel 108 km simply to collect a parcel or registered letter, 40km to post one. Running out of a supply of stamps is also extremely inconvenient. (another 108km because they aren’t available locally). Not to mention the other services our LPO provided, bill paying, banking etc. Such an initiative might well have saved this business. So, that should have been the headline (good news) story.
In regard to Morrison ‘s faux outrage – does he really believe that it is enough to convince the public he is serious about dealing with corruption? In my mind, it has provided him with a sideshow that conveniently distracts from the systemic rorting, nepotism and incompetence within his government.
The very idea of a federal ICAC must keep him and his cronies awake at night.
Gosh, we now have two gratefully-received distractions for Smirko.
I think a major driver of big salary and bonuses in the public sector, is the huge salaries and bonuses in the private sector. The result is you have to pay at least 1-2 million to big public CEOs if the Qantas or NAB CEO is pulling 10 to 20 million. So these huge unjustifiable private corporation packages are driving up the top in the public sector. So the primary question is who is worth more than 1 million in any sector.
Dead right. I was going to write something similar. In the private sector, CEOs virtually pay themselves what the members of a private club think they can get away with. Under the guise of the philosophy, ‘Pay peanuts and you get monkeys’. The opposite, of course, reasoning pertains to the casualised, insecure, low-paid workers in our service industries. In the public sector the absurd payments are scaled down, but the over-arching ideology has been truly absorbed and applied. Thus, people like public service department heads, university vice-chancellors, and even high school principals and bursars, think they’re CEOs at best, executives at worst. A high school bursar, for example, is likely to earn much more than a senior teacher with many years’ experience.
Your closing question is spot-on. The argument that a CEO’s pay has to be $5m or more in order to attract the best ‘talent’ is completely specious; we have to question whether anyone is worth that much, and whether anyone in private enterprise achieves anything for the social good.
Australia’s lamentably poor performance in corporate governance, and indeed just performance, could be much improved by adopting a version of the Rhineish capitalism model; ie mandate that every public company’s board must have independent representatives of labour and the community on it. The idea that a company’S only duty is to its shareholders is one of the most toxic influences that is destroying society and the environment.