Don Q.

The penny just dropped. On the subject of CEO salaries, that is.

It’s been a subject of media abuse for some time now. Over the last 30 years CEO salaries, as a multiple of the mean salary, have gone up and up, and up.

The issue for many of the envious and the entitled is that quite a few of the CEOs of Australia’s large entities still get multi-million dollar salaries and bonuses, even if they oversee massive corporate losses.

It has the sniff of self-serving entitlement to it, enabled by a lack of proper governance.

The counter-argument is this; CEO packages are set by the market, and markets aren’t wrong, or are the least wrong. Further, if you pay peanuts and you will get a monkey.

Back to the penny that has dropped.

The incremental value of a CEO to an entity is easily at its greatest when there is a large transaction such as merger, acquisition or trade sale. The good CEO, being a great negotiator and strategist, will add large percentage benefits to such a transaction thus easily justifying multi-million dollar packages.

Thus is the market for CEO salaries set.

However, here in Australia such large transaction are rare. The CEOs get the large salaries but don’t need or have the opportunity to justify them. Nor could they in most instances; the skills are missing.

The argument against their salary packages would be much more effective if the protagonists were to have this particular insight.

However, I suspect that most of them don’t even know enough to understand this argument. Which only highlights the root cause of their ineffectiveness, upon which the pig-trough classes rely in order to reward themselves so generously.