Deep pockets for head honchos

With a global financial crisis threatening jobs and household wealth, there is little evidence yet of restraint in the salary packages that corporate chieftains are prepared to pay themselves.

Greens motioned to curb executive salaries was soundly defeated - six votes to 45 - in the Senate.

Greens Leader Bob Brown noted that the 2006 average remuneration package of Australia's top 10 highest paid chief executives was $11.74 million and asked the Senate to recognise that the crisis will have serious negative implications for Australia and the world.

The forecast tightening in credit availability worldwide might have been expected to prompt a moderation in executive remuneration plans.

While Australia's more prudent banking practices have protected us from the large-scale job losses and plummeting house prices that sub-prime lending and debt securitisation has caused in the US, some fallout is still likely.

Already, expatriate finance professionals in New York and London are booking the next flight home as once-venerable institutions turn vulnerable.

Recruitment firm Michael Page has reported a 27% monthly increase in white-collar workers looking to return to Australia in August.

But there is little sign yet of executive salary restraint as the corporate reporting season unfolds, even in financial institutions.

Suncorp chief executive John Mulcahy has enjoyed a pay increase from $5.3 million in 2007 to $6.2 million in 2008, while the Bancassurance Group's shareholders watched earnings per share slide from $1.59 to 60 cents, and net profit from $1.1 billion to $556 million.

BHP Billiton is planning to expand the bonuses available to division heads to 320% of base salary, up from 210%.
 
The successful resources giant will require participating executives - who earn at least $1 million - to hold four times as many BHP shares.

At least the trend towards salary packaging shares or options puts more pay "at risk", aligning an executive's rewards more closely with the company's performance.

There was no evidence of performance-based pay in the termination packages paid last month to the chief executives of Fannie Mae and Freddie Mac - the US mortgage financiers at the epicentre of the financial tsunami.

Daniel Mudd and Richard Syron walked from their jobs with a combined $US9.43 million in retirement benefits as Treasury Secretary Henry Paulson asked taxpayers to prop up their failed institutions in a bid to keep the financial system ticking over. 

Published: 04 October 2008