The Sydney Morning Herald http://www.smh.com.au/news/9909/06/text/features2.html Employers to face mounting wage rage Date: 06/09/99 While some workers lose their basic entitlements, salaries at the top just keep on escalating. By HELEN TRINCA The Pelaco factory workers who knocked on Peter Reith's door last week, demanding their lost entitlements, were exploiting a new mood in Australia about the rights of employees. The public seems to be saying that while workers have to cop casual arrangements and loss of jobs, more stress, longer hours and less certainty, being dudded when an employer goes broke is asking a little too much. A deal is a deal, even in a free market. Certainly the Minister for Workplace Relations, who has flagged some form of basic compensation scheme, is not taking any chances with public opinion. Inside his Parliament House office he told the ABC's 7.30 Report that it was not right for workers at the low end of the food chain to lose entitlements when they could see executives walking away from failures with millions of dollars in their payouts. A few weeks back, Mr Reith said some executive salaries were too high. It is a populist pitch from a politician who knows salary comparisons between the top and bottom of the economy are not just large but laughable. As Herald writer Paul Sheehan reported on Saturday, the average American chief executive takes home 419 times the wage of the average factory worker. Australia is part of that trend. Our hierarchical system encourages workers not to mind the gap, but when the differentials are too great we can look forward to wage rage on a wide scale, especially if people start losing money they reckon is due to them. So backing workers' lost entitlements is as safe as fatherhood these days. People earning $100,000 may find it hard to relate to the difficulties people face in living on $40,000. But everyone understands the dismay felt when the $40,000 or $100,000 payout you have been calculating in your head for years suddenly evaporates. Maybe workers should take their holidays as they fall due; maybe redundancy payments should be seen as a last resort, not an automatic part of the wage deal. The fact is Australians are not in a mood to forgive the boss. These public perceptions should be a problem for business when there is talk of corporate social responsibility and the idea that doing business in a society is a privilege, not a right. But don't hold your breath. Chris Hart, of the executive remuneration firm Hart Consulting Group, sees no evidence of companies stepping back from the big bucks. Instead, he says boards of directors are putting more effort into justifying - rather than limiting - the huge executive salaries. Hart believes that far from being deterred by more exposure of executive salary packages - now required in annual reports - the CEOs are likely to use this data to ramp up their own deals. Transparency will simply aid salary negotiation. Base salaries have increased this decade, but so have bonuses for performance, which are now commonly set at 30 to 40 per cent of salary, compared with 15 to 25 per cent at the end of the 1980s. And the really big money comes from share options, which tie a chief executive's fortunes to a share price, which can be tied to something as concrete as the number of workers you manage to shed this year. As companies put their faith in the ability of a single person to turn a company around, even the gap between senior people increases. Hart says that while the old rule of thumb was that the number two got about 85 per cent of the salary of the number one, and the number three got about 85 per cent of the number two's salary, and so on, today companies use 60 per cent gradients to divide the cake. There are a couple of arguments used to justify the big money. One is that in a global world companies are competing with, say, the United States, for talent. It's depressing that while globalisation has boosted wages at the top, it has destroyed the bargaining power of millions of workers who have seen jobs go offshore to cheaper labour. The other argument is that it is much harder being a CEO now than it was a decade ago. Workers know all about that, too. The difference is that companies don't want to pay workers more for their angst but are trying to remove special payments - like penalty rates and overtime - which were designed to compensate workers for loss of lifestyle, health and happiness. There have always been some crazy elements to remuneration. For example, why are the most important jobs in the world - child care and teaching - so poorly paid? But the entitlements issue - which is not about how much a person is paid but about whether he or she will be paid - suggests you can push people only so far. Corporate Australia, take note. As for Peter Reith, perhaps he could help by questioning the skills needed by CEOs as he did the the skills needed by wharfies in last year's Patrick dispute. 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