Former treasurer Wayne Swan warns climbing executive pay could trigger new financial crisis
Former treasurer Wayne Swan has warned surging chief executive pay risks mirroring the events that led to the global financial crisis almost 10 years ago.
Bear Stearns chief executive James Cayne sold his stake in the company for US$61 million after its collapse and his inflated salary saw him named in Time magazine as one of the top 25 executives to blame for the financial crisis.
Mr Swan, who served as treasurer in Kevin Rudd’s Labor government from 2007, told the ABC average chief executive pay had recovered to $5.2 million since the crisis, in a sign of complacency about the recovering global economy.
“There’s no question about that.
“We’re also seeing arrogance and I think executives suffer from a blindness of affluence at a time when we’ve got record low wage growth and record low wage share,” Mr Swan said.
“I think there are short memories as CEO salaries shoot up to almost pre-great recession levels.
“Only last year we had the spectacle of seven CEOs coming down to Canberra to lobby for a $65 billion corporate tax cut when their combined salaries amounted to $65 million.
“For example, the National Australia Bank’s chief executive [Andrew Thorburn] is paid 108 times average weekly earnings. You get the feeling that the NAB’s slogan, ‘more than money’ might as well read, ‘more money’.”
Mr Swan has launched a report by The Australia Institute showing that while average weekly earnings have less than doubled since 2000, the salaries of senior executives at the Commonwealth Bank and National Australia Bank have tripled.
The report shows that before the financial crisis, the highest CEO salary was $33.5 million, This fell to $11.8 million in 2011, before bouncing back to $21.6 million last year.
Mr Swan said the study highlighted gross distortions in salaries, despite the pressure from shareholders in the “two-strike rule” where protests can be made at annual general meetings to rein in executive pay.
The study says a key lesson from the global financial crisis is that a surge in executive pay is not only unwarranted, but dangerous given the high-risk culture of some financial institutions.