SYDNEY, Nov. 20 (UPI) -- Zap! Pow! Blam!! It's annual meeting time, and in austere halls around Australia, shareholders have signaled it's open season on the company boards and executives of some of the nation's biggest corporations.
Sparking the offensive are the substantial executive salaries that many regard as not only excessive but obscene.
According to a survey by remuneration specialists, Towers Perrin, Australian chief executives are now the third-highest paid in the world behind the United States and Britain, with their average annual package, including options and bonuses, soaring 73 percent to $1.3 million over the past two years. The average U.S. package is $2.7 million while in the United Kingdom it is $1.37 million.
Not bad, considering many Aussie companies operate in a virtual monopoly or duopoly market not much bigger than a duck pond.
Indignation has turned to condemnation. Executive pay rises are jarring with company earnings downgrades and falling share prices, not to mention wholesale lay-offs and wage freezes.
There are almost daily attacks at shareholder meetings, in the media, and by politicians. People are rankled. How can anyone be worth that much?
Particular vitriol is reserved for chief executives given generous termination payments often after under-par performance.
"The total figure has rocketed in recent years way ahead of sharemarket and profit growth," said shareholder activist, Stephen Mayne. "What we've seen since the 1990s has been an uncoupling of performance and pay."
The head of the Australian Shareholders Association, Ted Rofe, is equally disturbed by the situation.
"There's a growing discrepancy between remuneration of senior executives and the average man in the street," says Rofe. "During the good times, people were less critical. But as times get tougher, people are starting to ask: is it reasonable, is it equitable?"
The ASA's greatest concern is in relation to people getting paid highly and not managing their organizations well. Even the conservative Australian Financial Review has gone on the attack, recently devoting a 20-page supplement to corporate payouts.
One columnist wrote: "The underlying principle behind all corporate remuneration systems should be that executives and directors grow rich WITH their shareholders, not at their expense. Looking through the salary packages ... it is by no means clear that this principle is being honored."
It's not hard to find some mind-blowing examples of excessive payouts.
Let's start with Sheryl Pressler, the former head of Lend Lease's US Real Estate Investments division, who walked away with $15 million after just 12 months in the job. Her package equated to 10 percent of the firm's profit for the year.
Then there's George Trumble, brought out from the United States to run insurer AMP. He was paid $30 million over four less than spectacular years, including $13 million when he left.
Former directors of failed telephone company, OneTel, Brad Keeling and Jodee Rich, received bonuses totaling $15 million just months before the company collapsed.
And Joe Pickett and Hugh Harris, former chief executives of National Australia Bank's U.S. mortgages arm, Homeside, received close to $10 million in performance payments despite the discovery this year of long-running mistakes that led to the bank chalking up close to $4 billion in total losses.
Meanwhile, Ian Clack was paid $6 million to leave after taking spice merchants Burns Philp to within a breath of bankruptcy.
And, sure, it's lonely at the top, but it's getting harder to justify the swag of golden handshakes to Coles Myer's Dennis Eck ($8.65 million), BHP's John Prescott ($12 million), AGL's Len Bleasel ($11 million), and NAB's Don Argus ($9.259 million).
So, what's causing this blowout?
"Company chairmen are always citing the 'voyeur effect' of greater disclosure (of payments to chief executives) leading to increasing me-toism," says Stephen Mayne. But I think the greatest reason is the influx of foreign chief executives. At one point in the last couple of years six of the top ten companies were managed by foreign chief executives -- that's the highest proportion of any Western economy."
Most foreign chief executives come from the United States and want to be paid an equivalent salary to what they were paid at home. When they leave, their salary packages create a follow-through effect for local chief executives.
Another cause is poor succession planning by many companies. Often when a chief executive leaves, the board commissions a 'headhunter' to find a replacement. Some argue that if you have trained a replacement from within, then that would lead to a cap on salary levels.
And why the staggering termination payouts? Many stem from the reluctance of the board to get involved in a court battle. At times, chief executives are paid handsomely to go quietly so their departure doesn't overly affect the share price. There's also a theory that chief executives need a helping hand when they go because being a chief executive is like jumping off a cliff -- their future is so uncertain.
"But that's complete bollocks," says Mayne. "Chief executives actually do very well when they leave."
Just ask Tom Park. He took $7.8 million when he left winemaker Southcorp, after just five months, when his position became redundant following a merger with Rosemount. Almost immediately he took the reins at Goodman Fielder.
Furious private shareholders are finding it desperately hard to vote down these high payments when financial institutions, which are the majority shareholders, wave them through.
"Institutions are part of the problem," says Mayne. "Their chief executives have their snouts in the trough too, so don't kick up a stink about it. The whole issue is there is no separation between professional shareholders and the company directors. They are the same group of people. Some chairmen sit on several boards, so they are actually sitting on both sides of the fence."
Mayne says the only way things will improve and chief executives start being paid commensurate with their performance is if major shareholders, particularly the government through its superannuation funds and investment bodies, vote down over-generous benefits.
There are signs that the tide is starting to turn, if somewhat slowly. Some executives are taking pay cuts as a show of solidarity with their workforce. At Qantas, highly regarded Chief Executive Geoff Dixon last week announced that he and 600 management staff had foregone performance bonuses as he sought to share the pain of wage freezes and job cuts following the downturn in the aviation market. "I felt that in the current conditions, although the performance of the company was quite credible, that we probably should give it up," Dixon said. "Everyone's in this boat together."
And in recent weeks, major companies like Mayne Nickless and John Fairfax have either restructured their boards, deferred controversial resolutions or taken polls on executive option packages following resistance from institutional investors.
Predictably, these actions are not so popular at the top.
Peter Ritchie who sits on the board of Seven television, which has voluntarily cut its costs to Seven by 20 percent, says reaction from the members of other boards on which he sits has been "a little bit reserved. They've looked at me a little bit askance as if to say 'you are setting a bad trend'."
