Labor targets CEO pay
Disclosure alone won’t fix wage inequality
There is always something to learn from a speech by Labor frontbencher Andrew Leigh, one of the very few former academics in the federal parliament. In a speech to be given in Melbourne tonight – which announces a new proposal for mandatory disclosure of CEO pay as a multiple of that of the company’s median employee – the shadow assistant treasurer reaches right back to the industrial revolution. He describes “Engels’ Pause”, a half-century lag between growth in productivity from mechanisation and wages growth for ordinary workers, which was first discussed by Marx’s famous colleague Friedrich in The Condition of the Working Class in England. The Pause only ended when the workers took collective action.
“In 1833,” Leigh reminds us, “six agricultural labourers in Dorset swore an oath to stand together against attempts to cut their pay from seven shillings a week to six. The Tolpuddle Martyrs were convicted of swearing a secret oath, and transported to Australia. So strong was the support for the union cause that 800,000 people signed a petition calling for them to be pardoned, which was done in 1836.” Perhaps, with digitisation, we are seeing a repeat of Engels’ Pause? In Leigh’s speech, “Why Unions are Vital to Advance Australia Fair”, he argues that the solution is the same: collective action.
Leigh’s pay proposal is hardly radical: it would only apply to listed companies with more than 250 employees and mirrors similar laws in the UK and US, where disclosures have formed the basis of media coverage such as Bloomberg’s CEO pay tracker. Leigh rejects calls for firm caps on CEO pay, saying they could have unintended consequences, such as when limits on tax deductions against CEO pay packets above $1 million provoked an explosion in remuneration via stock options. Already the Australian Shareholders Association has backed the proposal, to take effect from 2021.
Today in the AFR, it is reported that Domino’s CEO Don Meij, reportedly the highest paid chief executive last year on a package worth $37 million, has backed [$] Labor’s plan, saying it would promote transparency and help lift workers’ pay. He called on the Coalition to adopt it. Meij may change his tune when he reads Leigh’s speech, which points out that his exorbitant package came “after a year in which the Fair Work Ombudsman publicly complained that Domino’s had failed to comply with requests to provide information into claims that Domino’s franchisees were paying workers as little as $10 an hour. Last year, Mr Meij earned $10 every eight seconds.” Meij argues the $37 million figure was inaccurate and the actual figure was a tenth of that.
Leigh pitches the pay measure as a way of tackling inequality, which has risen inexorably over the decades, and as a prelude to giving ordinary Australians a pay rise. The average realised pay of ASX100 CEOs rose by 9 per cent last year, he says, which is four times faster than average wage growth. Among the ASX100, median CEO pay is now $4 million, while mean CEO pay is $6 million. The average pay for ASX100 CEOs was 75 times the average pay of full-time workers, meaning a CEO takes home in a single year what it would take the average worker nearly two lifetimes to accrue. “I fully expect that some of our frothier critics will say that this is an attack on capitalism,” says Leigh. “Nothing could be further from the truth.”
More confronting than Leigh’s pay proposal are his reflections on the decline of union membership in Australia, which his own analysis suggests is now lower – at 13 per cent – than at any time since 1904. This is despite a litany of achievements for working people, which includes sick leave in the 1920s; annual leave in the 1930s; the eight-hour day in the 1940s; unfair dismissal protection in the 1970s; banning asbestos in the 1980s; the weekend; paid public holidays; and long service leave. “Unions helped create the first occupational superannuation schemes, which grew into universal superannuation today. Unions spearheaded the campaign for parental leave, and are now at the centre of the campaign for family violence leave,” Leigh says.
Leigh draws the link between low union membership and low wages growth, to explain the “real wage underhang” in which workers have failed to get their share of productivity growth. It’s a subject explored in the seminal “Pay Paradox” series by The Guardian’s Greg Jericho and Gareth Hutchens, and it’s far from a uniquely Australian problem. At a recent press conference, US Federal Reserve chair Jerome Powell admitted that the lack of pay rises was “a bit of a puzzle”. Historically, a scarcity of workers has led to higher pay – a relationship documented in the “Phillips Curve”. Yet despite historically low unemployment, many American workers are experiencing flat wages. Leigh suggests unions are the missing piece.
since this morning
The Australian reports [$] that WA premier Mark McGowan has said he was “surprised” that federal Labor is not supporting Scott Morrison’s planned legislation to overhaul GST distribution.
In Fairfax Media, former prime minister Kevin Rudd argues that “if ever there was a case for a full royal commission into the abuse of media power in Australia, it is now”.
in case you missed it
In an interview with Fairfax Media, Neil Brown – a former member of the independent nominations panel for the ABC and SBS boards – lashed the Coalition for “abusing” the system, and accused Communications Minister Mitch Fifield of “making a fool of himself” by repeatedly ignoring advice from the panel. Brown was a minister in the Fraser government and deputy Liberal leader under John Howard.
The Guardian reports on department of industry figures showing that the value of Australia’s coal exports is forecast to decline sharply over the next 18 months as thermal coal prices drop 25 per cent and metallurgical coal prices fall 23 per cent.
Labor is ramping up its campaign to have the banking royal commission extended, with a series of roundtables planned around the country in places the commission has not visited.
In The Australian, Simon Benson writes [$] that Opposition leader Bill Shorten’s internal victory over those who wanted to break up the Department of Home Affairs is unlikely to deliver an “electoral dividend for Labor … [but] will ensure the damage caused by the previous Labor regimes is not compounded”.
RMIT ABC fact-checkers rate as “overreach” a claim by Prime Minister Scott Morrison that “the gender pay gap has fallen from 17.2 per cent to 14.5 per cent” under the government’s policies.
Paddy Manning is a contributing editor (politics) at The Monthly. He is a writer and journalist who has worked for the ABC, Fairfax, Crikey and The Australian. He is also the author of three books, including Boganaire: The rise and fall of Nathan Tinkler.
There is always something to learn from a speech by Labor frontbencher Andrew Leigh, one of the very few former academics in the federal parliament. In a speech to be given in Melbourne tonight – which announces a new proposal for mandatory disclosure of CEO pay as a multiple of that of the company’s median employee – the shadow assistant treasurer reaches right back to the industrial revolution. He describes “Engels’ Pause”, a half-century lag between growth in productivity from mechanisation and wages growth for ordinary workers, which was first discussed by Marx’s famous colleague Friedrich in ...