CEO pay of $600k is unethical: survey

Chief executive salaries of $600,000 and above are viewed as unethical by the majority of Australians, according to a new survey that highlights the yawning gap between public expectations and reality on executive pay.

The same survey also shows public concerns about ethical failings in finance have only marginally faded in the past year, despite banks’ attempts to rebuild customer trust, and a series of government policy changes.

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Politicians and even some business leaders have criticised the pay enjoyed by top executives in the past year, and a new survey sought the views of a broad spectrum of 1000 Australians on the issue. 

The survey, from the Governance Institute of Australia, found 55 per cent of respondents thought a salary of $600,000 a year was unethical for a chief executive running a company with more than 1000 staff.

Seventy-seven per cent thought $3 million in CEO pay was unethical – even though this is close to the average pay packet of $2.88 million for a boss of an ASX 300 company, according to the Australian Financial Review’s salary survey.

A salary package of $300,000 was viewed as more appropriate. Forty-six per cent of respondents thought this was ethical, compared with 27 per cent who thought it was unethical.

The findings come after politicians have attacked the high pay received by some executives, with Prime Minister Malcolm Turnbull earlier this year warning of a “cult of excessive executive CEO remuneration,” as he said former Australia Post chief Ahmed Fahour’s $5.6 million pay packet was over the top.

National Australia Bank  chairman Ken Henry also said in December that a growing number of business leaders believed “enough is enough” when it came to CEOs being paid huge multiples of their staff.

Ethics in banking  has also remained in the spotlight as Opposition Leader Bill Shorten has continued to push for a royal commission into the sector

The survey’s ethics index found banking, finance and insurance had the equal lowest rating for ethics, on par with the “corporate sector” as a whole.

The media had the third lowest ranking. Respondents rated the ABC as the most ethical media platform, followed by radio, free-to-air television, LinkedIn, and newspapers. Social media platforms Facebook and Twitter were judged to be the least ethical. 

The corporate sector – especially banks – also received low rankings when the survey was conducted last year.

Since then, the federal government has targeted banks with a new standing parliamentary inquiry, as well as a new tax and a bank executive accountability regime, announced in the budget.

Yet the chief executive of the Governance Institute of Australia, Steven Burrell, said the government’s moves to give bank regulators more power to oversee bank executives and their salaries had done little to arrest public concerns about a lack of ethics in the sector.

“But one has to wonder if a royal commission is the only way we can restore community trust in the financial services sector?” Mr Burrell said.

When asked to nominate the most important issues relating to unethical behaviour in banking, survey respondents identified executive salaries, bonuses, treatment of customers, and insufficient regulation.

Banks have responded to the political pressure and erosion in public trust by scaling back sales targets for frontline bankers, and trying to promote ethics among their staff. 

In a sign of this push, ANZ chief executive Shayne Elliott this week sent the bank’s staff an eight-page letter on “The ANZ way” that emphasised ethical conduct as a key goal.

“Our industry’s reputation has been tarnished because we haven’t always evolved our thinking to keep up with changing community expectations. As a business based on trust, we simply can’t allow this situation to continue,” Mr Elliott wrote.

Current chief executives of the big four banks such as Mr Elliott are also being paid less than their predecessors, though they still all received more than $5 million each last year.

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