The rich get richer

Growing
wage differentials are now a feature of the Australasian labour market, as
Richard Rudman reports

Melbourne’s
citizens were shocked when they found out that the city council’s chief
executive is paid A$30,000 a year more than the premier of their state,
Victoria. Welcome to the era of market-driven remuneration.

It’s
become a familiar refrain in Australia and New Zealand. Organisations claim
they need to pay executives their true worth in a global labour market, while
shareholders and taxpayers retort that pay is often excessive and out of line
with job demands and organisational performance. The Melbourne case is a good
example. While Victoria’s A$22.2bn revenues and A$13.5bn assets clearly
outstrip the city council’s A$216m turnover and A$1.96bn assets, few were game
to suggest that the premier’s salary of A$250,000 might be too low.

Australia’s
prime minister, John Howard, isn’t deaf to these criticisms. He has no
intention of "interfering in remuneration levels", but told corporate
Australia that "if it looks as though one part of the community is
overindulging itself, that will cause resentment".

Scarcely
had he sounded that warning when the resentment was fuelled by a report that
salaries for chief executives of Australia’s 100 top companies had risen by 22%
the previous year, to an annual average remuneration of A$1.45m. Over the same
period, average earnings for Australian workers had risen by little more than
1% – about half the level of inflation.

It’s
a similar picture in New Zealand. Anger there was fired up by reports of top
newsreaders being paid half a million dollars or more by the state-owned
television channel. Incredulity set in when it was revealed that the chief
executive of a privatised electricity generating company had been paid NZ$6.5m
over two years – compared with annual remuneration of around NZ$425,000 and
NZ$335,000 for the heads of two state-owned power generators.

The
privatised company’s chairman – himself a highly paid chief executive based in
Sydney – blustered about the need to reward performance and retain high-calibre
executives. That argument was shown to have some strength when the chief
executive resigned and returned to a previous employer in Britain, for an even
higher income. But that cut no ice with Kevin McBride, head of HR consultancy
Cubiks in New Zealand, who described the remuneration level as "way out of
step".

According
to McBride, top pay for chief executives of New Zealand’s largest companies is
around NZ$400,000 base salary, NZ$600,000 total remuneration. Sydney-based
executive search and selection firm Korn/Ferry puts the range a little higher –
an average of NZ$650,000 for New Zealand chief executives and NZ$710,000 for
their Australian counterparts.

McBride
questions whether there is sufficient difference in the size of most New
Zealand companies to justify high differentials in remuneration. And for the
"global competitiveness" argument to work, he says there has to be
substantive evidence that executives can apply or be "head-hunted"
for offshore vacancies and compete for them on an equal footing: "Only a
very small number of New Zealand executives in a limited range of sectors would
meet those conditions."

Differentials
are growing throughout the organisation. A national employers’ wage survey
showed that accountants and IT professionals with less than five years’
experience enjoyed the fastest-growing pay packets in New Zealand over the past
five years. Their base salaries increased by 35% from NZ$40,000 in 1996 to
NZ$54,000 in 2000. Over the same period, supermarket checkout operators saw
their take-home pay fall by about 2% to NZ$18,500.

Growing
wage differentials are a feature of the Australian labour market as well. As
downsizing and cost cutting continue to bite, job opportunities and wage levels
are inevitably depressed. But there’s no single pattern. While workers in
traditional manufacturing companies have it hard, those with "new
economy" skills do well. Finance professionals, for example, were in great
demand throughout 2000 – as Australia coped with a volatile stock market, the
implementation of a goods and services tax, and the run-up to the Olympic Games.

And
the booming call-centre business is creating more jobs than there are people to
fill them, according to call-centre consultancy Hallis. Staff get around
A$32,000 on starting, with team leaders earning up to A$50,000 and more. A
call-centre manager who oversees more than 250 staff can earn A$150,000.
Intriguingly, a joint study by Sydney-based consultants Mercer Cullen Egan Dell
and Korn/Ferry has found that setting remuneration for e-commerce workers is
largely a matter of trial and error.

"Remuneration
decision makers are grappling to know how e-commerce roles fit into their
business", says Ilya Bonic of Mercer Cullen Egan Dell. "So they’re
uncertain whether to adopt a job family or an industry approach." But
e-commerce firms seem to be looking very closely at the contribution that
individuals make to the business, relying less on market rates as a guide to
setting remuneration. The critics would say that many organisations need to
look more closely at individual contributions and market rates when setting
their chief executives’ remuneration.

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