Big Pay Packets A Result Of 'slimy Culture'
The Age
Thursday December 11, 2008
GREEDY people and a "slimy culture", not market forces, are responsible for excessive executive pay, former Reserve Bank governor Bernie Fraser says.
In the ACTU Whitlam lecture on Tuesday, Mr Fraser attacked executive firms that recommended high salaries and boards that approved them.He said market forces tended to be used to justify high pay. "If this is the case, it's a pretty strange market, it's not a transparent market, it's not a contestable market."He suspected many chief executives would accept packages that were a fraction of what they received."In fact, of course, it's not the market that determines these packages, it's greedy people and a slimy culture."Public exposure and increased pressure from shareholders would help tackle the issue. Another option was taxing more heavily big pay packages and a more "progressive" tax system.This could be done by taxing income and capital gains at higher rates.Mr Fraser, Reserve Bank governor from 1989 to 1996, took aim at ideological approaches to public policy, saying excessive faith in market forces had failed. He said the current financial upheaval had become threatening because of the sheer growth in under-regulated financial markets. "These activities have grown from facilitating other activities to being markets for investments and speculation in their own right," he said.Mr Fraser said the other big issue was the globalisation of these markets, with the flows of financial products now many times greater than that associated with trade or direct investments.
© 2008 The Age
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