27/05/2003 - 22:00

Editorial - Pay cut lauded

27/05/2003 - 22:00


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WHATEVER you might think of the way Singaporeans run their state, you have to hand it to the head of its airline and his management team for taking a pay cut due to the tough economic circumstances.

WHATEVER you might think of the way Singaporeans run their state, you have to hand it to the head of its airline and his management team for taking a pay cut due to the tough economic circumstances.

Management at Singapore Airlines will take pay cuts of up to 27.5 per cent and directors’ pay will be slashed in half as the airline seeks to find $200 million in cost savings as the country struggles with recession and SARS.

This is the second time in as many years that the company’s leaders have taken such a stance – the first was soon after the New York terrorist attacks of September 11 2001, another global event that Singapore Airline’s management could neither have predicted nor been blamed for.

I couldn’t help contrasting this attitude with what is happening in corporate Australia, where failed leadership is paid off so handsomely.

Singapore’s detractors could probably argue that the senior players at Singapore Airlines are protected by the nation’s cosy relationship between politics and business.

Perhaps they are right. Maybe such pay cuts are merely a goodwill gesture for public consumption, with the promise of future reward for loyal service.

That is definitely a contrast to here, where State and business are much further apart (even with the Liberals in power) and huge payouts like the latest to Brian Gilbertson of BHPBilliton have embarrassed the Federal Government. The same issue is embroiling business in the UK.

So, is regulation of executive salaries a good idea?

As an aside, it is interesting to note that such calls echo similar sentiment to the argument over deregulating shopping hours – both are meant to be best for consumers.

As someone who is opposed to regulation (I only ask for caution in dismantling it so a level playing field is created), I can’t see how regulation can work in this instance.

It is up to shareholders to regulate pay themselves – and directors and management to learn what is acceptable.

The Singaporeans obviously see future rewards in taking a pay haircut today, so how come our business leaders are different?

Perhaps it comes down to when we expect to receive our rewards. In Singapore, it is when they are due – in Australia we take future income, growth and global domination, package it all up in a remuneration calculation and forget to wait until the results have been achieved.

Losing battle

THIS might well be my last word on the deregulation of shopping hours.

With WA the last remaining domino, and a few million bucks on the table, I can’t see us holding out against the might of Coles Myer and Woolworths.

This week we have revisited the subject again in a major way and attempted to scratch the surface of the huge lobbying effort that will, either now or shortly thereafter, deliver the major supermarkets what they wanted.

The irony is that shopping hours deregulation is the competition policy issue that is likely to deliver less choice for consumers in the long run, as Coles and Woolies gobble up the food market.

Those other big issues, taxis and liquor, have hardly rated a mention, yet I would argue that those regulations impact consumers just as much and deregulation would actually increase competition.

It’s a pity those consumer-loving lobbyists from the major retail chains haven’t put some of their energy into the liquor market.

But then why would they? They already dominate it and use their considerable muscle, in the form of legal action, to oppose new liquor licences and make it very hard for newcomers to compete against them.

In other words, they are protected by regulation in a major market that would benefit from deregulated shopping hours – liquor.

Go to the UK and that is what all the small convenience stores thrive on – beer and wine sales after working hours and late into the night. Here, they will not have that option to compete against the big boys.

As an aside (yes another one) – take the trouble to read a recent double page advertisement in The Australian newspaper (May 17-18) from the Sydney-based Kemenys liquor retailers and their tongue in cheek letter to the Professor Allan Fels.

After reading it, see if you think national market power improves prices for consumers.

For further supporting data, read our story on milk prices post deregulation on page 17.

In my view, competition will not be improved nor will long-term prices by allowing Sunday trading, so let’s get rid of all the bulldust surrounding this issue.

Consumers get more time to shop (apparently they wanted it even though it has never been an election issue in this State) and the big supermarkets get the market growth (at the expense of smaller stores) they need to keep their fund management investors happy.

That is the end result of deregulation.


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