Monday, October 07, 2013

Time to cap executive salaries

While ordinary kiwis' wages and living standards are going backwards, corporate CEOs continue to make out like bandits:

The pay between the pay of top chief executives and the staff they manage appears to be growing.

In the latest Fairfax annual survey of pay rates at listed companies, the average pay of CEOs in 2012 was 26.4 times that of the average employee in the same companies. That's up from a multiple of 22.5 times in 2011.

And note that this excludes investment companies and the finance industry, where the real pillage happens.

Stopping inequality means not just lifting the bottom, but also capping the unjustifiable excess at the top. More countries are giving corporate shareholders a say on pay, but that's a weak pressure because most companies are owned by other companies and have their positions determined by high-paid executives with an incentive to support the current system. Interestingly, Switzerland passed a referendum "against rip-off salaries" earlier this year, setting tighter legal limits around the setting of executive pay (and requiring pension funds to vote in the interests of their policy-holders while outlawing company directors from holding proxies), but that hasn't been enough. So next month they'll be voting for a hard cap on executive remuneration, limiting it to 12 times what a company's lowest-paid staff member earns in a year. Naturally, the Swiss government - a reliable pawn of corporate interests - opposes the measure, citing the usual fears against capital flight and lost taxes (and ultimately "confidence", which tells you what bullshit it is). But that's exactly what referenda are for: so the people can legislate in the face of government opposition, and reclaim government for themselves.

It would be nice to see a similar measure in New Zealand. But Labour is too afraid of, too subservient to the rich to ever dare. Unless we gave them a mandate through a referendum.