CEO pay: is it out of control?

The pay packages for CEOs over the past 10 years have more than doubled according to a report on executive wages. So did your pay double during that time too?

The Australian Council of  Superannuation Investors found the average chief executive's total pay package last year - $4.9 million - was up on 2009. Astonishingly, it was actually 9.3 per cent higher than the payouts chief executives received in the boom times of 2006.

In other words, they are doing better now than they were during the good times.  It’s true that the average CEO's fixed pay for 2010 actually fell for the first time by 4.4 per cent because of the global financial crisis. But what helped to keep them rich were those gigantic bonuses.

In fact, the executives at Blue Scope Steel picked up $3 million of bonuses while sacking 1000 workers. Then they had the temerity to defend it. Not to mention Qantas chief executive Alan Joyce who has received a 71 per cent increase in his total pay to $5 million, up from $2.9 million, while planning to cut 1000 staff.

Meanwhile, the rest of Australia is not doing quite as well. Compare the CEO pay levels with ABS figures showing that Australians earned an average $46,599 in wages and salaries in 2008-09, up from $43,921 in the previous year.

Compare this to Rio Tinto boss Tom Albanese, who enjoyed a mind-blowing 328 per cent pay rise. Or the outgoing Commonwealth Bank chief executive Ralph Norris who took home $16 million last year - a whopping pay rise of 75 per cent. How much is that per hour?

True, his pay packet was then sliced in half to a mere $8.64 million following a drop in customer satisfaction after the CBA lifted mortgage rates by nearly double the Reserve Bank's rise, but he’s not exactly on Struggle Street.

Neither are other banking executives. ANZ boss Mike Smith last year took home $10.9 million, while Westpac chief executive Gail Kelly made $9.5 million. National Australia Bank's Cameron Clyne had a package of $7.7 million, including incentives.

At the same  time, additional ABS data shows that unlike CEOs, just about everyone else (except for the lowest income earners), have been earning less over the past two years, with total disposable income for everyone else falling for the first time in 14 years.

Average income earned by a household in the top 20 per cent slipped from $4136 a week to $3942 after adjusting for inflation while the average mid-range household income slipped from $1356 to $1323.

And of course any pay rises for those moving up the ladder are almost immediately absorbed by the rising cost of living.

In fact a survey conducted by CoreData, found almost a quarter of Australians were struggling to make ends meet at the moment.

It said 15 per cent were dipping into savings accounts and 11 per cent racking up debt in order to keep up the lifestyles they have become accustomed to.

As the Home Loan Daily blog puts it, the pay gap is beyond a joke at a time when everyone is struggling, “The average worker pulled in a little over $65K in 2010 whilst the average CEO of a top 50 company listed on the Australian Securities Exchange raked in over $6.4 million dollars – nearly 100 times the average salary. You may have earned around $30 per hour but these CEOs won’t get out of bed for anything less than $3,000 per hour"

It points out that the average national median house price in June of 2010 was slightly more than $550,000 – which many of us will take 25 to 30 years to pay off.

"To paint a scarier disparity in purchasing power, consider this: if the average worker paid no income tax, wasn’t charged interest on the home loan (fat chance!) and didn’t spend a cent on anything else, it would still take nearly nine years to pay off the mortgage. Whereas under the same conditions, it would take the average CEO less than one month to own the house outright.”

I don’t begrudge CEOs making money, it’s been ever thus. But there is no way these guys are worth what they're being paid, and it baffles me as to why their worth increases so much from year to year.

What also concerns me is that the growing impact of inequality affects society's overall sense of well-being.

Epidemiologists Richard Wilkinson and Kate Pickett argue in their book The Spirit Level that the wealthiest and most unequal societies lag behind countries in every measure of health, happiness, and well-being.

Pickett's research shows that the US has the worst health and social problems in such areas as numeracy and literacy, infant mortality, homicides, imprisonment, teenage pregnancies, lack of trust, obesity, mental illness and social mobility. Britain comes in as the third worst, while New Zealand and Australia come in at four and five.

I think the gap between CEOs and the rest of us is part of that story.

Do you think it's fair that CEOs get paid so much more than ordinary workers?