Paying out

THERE has been a lot of talk lately of the bonuses, pay rises and special payments on retirement to company directors.

Some of the most poor-to-average performing companies have sought to look after certain directors and executives with all sorts of pay boosts that really are hard to explain.

There is a point where it is hard to justify such extraordinary amounts of money when the company is hardly standing head and shoulders above the market.

And that is when the market is in the doldrums.

There are a number of things to consider here because many of these payments take such different forms for very different purposes.

Let’s start with large payments made to departing chief executives.

There are a couple of pretty blatant examples floating around at the moment.

If such payments are part of a contract, so be it. I would never advocate breaking a contract, but it seems very odd when an executive is taking multi-million dollar bonuses after he or she has literally been pushed out the door.

Even worse, though, is the parting gift.

Big sums of shareholders’ money handed over to ex-CEOs as parting gestures seems ridiculous. It is not the directors’ money to splash around in such a fashion.

It is not as if the former leader is going to promote the company’s cause any more than he or she would of previously. Surely they have created what it is. Weren’t they paid enough when they were there?

Such activity, which smacks of old boys’ club decision-making, is particularly galling when an operation has performed poorly against benchmarks, of late, and has to cut back costs so significantly it is struggling to adequately keep core enterprises working.

I am very much against retrospectively organised bonuses, unless you want the executive to stay. Tell them to buy a Lotto ticket instead. Another payment is to executives who have apparently met “technical” performance measures, established achievements in their areas of expertise, which may or may not stack up to immediate financial return.

Though less dubious it would still help the market if there was some warning of these imminent bonuses, and a bit of an explanation.

At the end of the day, companies can choose how they want to remunerate their executives but those most indulging in the feeding frenzy are creating a climate where further accountability will be required.

And, if the market can’t stop executives from being overpaid for under achieving, then perhaps the boards making the decisions ought to be targeted.

Parties’ blueprint

I WAS amazed to see this week’s comparisons of the Liberal Government and current Opposition by economic pundits and how closely the two compared.

Based on the current composition of the parties, John Howard’s Liberals were seen as only marginally ahead overall and lost out in several areas of economic responsibility.

While all this is conjecture, it is fascinating to consider.

That the two can even be compared shows the enormous change in our electorate. As better educated and, literally, wealthier voters have come to learn, the best chance they have is in a well-managed economy.

The hand-out mentality is slowly being chipped away as interest groups come to realise that their demands can unbalance the system in an unsustainable way.