Is the Boss paid too much?
(article published in The Australian Financial Review)
Even critics of current pay scales, such as Greg Brogan, managing director of consultants Exexutive Pay Systems, do not support regulation.
Brogan says the argument that executive pay tracks shareholder returns is a sham when the data is analysed, even allowing for the lag in timing between when remuneration is awarded, paid and announced and earnings reported.
"Whilst all companies profess to use performance based pay, historical analysis reveals that short-term incentives grants made over the yearshavr rarely been linked to performance based outcomes," he says.
Rather, boards use data to determine market rates then pay enough to secure candidates, which rachets pay up inexorably over time.
"The solution to these problems is is not found in legislation or regulation," Brogan says.
"Many companies approach remuneration decisions properly and would simply be hampered by more rules and rigidity. The souution lies in the boardrooms of Australia. Directors need to stand up and do the job they're being paid by shareholders to do."
