Real talk: The corporate tax cut needed improvement

Like all good Australians I am passionate about my career and the prosperity of our great nation; not just locally but on the global stage. The proposed corporate tax cut was a well-intentioned effort to incentivise businesses to employ more Australians and stimulate reinvestment in our economy, but as we all know, it didn’t pass.

Personally, I think the proposal could have done with some further enhancements. Based on experience, more profit after tax for companies could result in executives and board members receiving higher pay or other perks, while the average Australian worker may see few real advantages.

If the government ever makes another attempt at reducing the corporate tax rate, it will need to make sure more Australians reap the benefits through stable employment and increased career opportunities.

My proposed solution

I think businesses should introduce a metric whereby a CEO’s pay cannot exceed a certain ratio, when divided by a weighted average of the number of workers in an organisation and their pay, at every level.

Organisations are complex and come in all shapes and sizes, so I do not attempt to propose a simple formula in this article. I presume the government will have econometrics staff who can work through the details of how such a calculation can be done.

My goal is simply to convey the key concept that executive remuneration needs to be more aligned to the remuneration of staff in the organisation as a whole.

My reasons for implementing such a ratio are as follows:

  1. After many years in corporate life, I have come across many CEOs and board members. At the end of the day, they are only human.
  2. My proposed ratio calculation means that a CEO’s remuneration must stay in sync with what their staff (from the bottom up) receives. Every CEO depends on the people in their organisation to succeed. For example, if there is a huge blue-collar workforce in their organisation, the CEO’s remuneration has to reflect that mix of people.
  3. I once worked for an iconic Australian brand and the CEO was paid in the past year in excess of $20 million. And yet I have former colleagues who are still with this company who cannot even find a desk to sit at due to ‘activity-based desking’. This is promoted to staff as some form of modern corporate cultural innovation, but (in reality) is an attempt to cost cuts.
  4. The argument that lower remuneration means a company will fail to attract high calibre CEO candidates is nonsense. Even if CEO and board remuneration are adjusted using my ratio, I am sure there will still be a pool of talent willing to do the job for less or an adjusted amount of money. At that level on Maslow’s Pyramid, no executive is on the bread line.
  5. A person who does not have the passion to do their utmost to foster growth and nurture their staff at every level does not deserve to be a CEO in the first place. Employees who are paid fairly will have more agency to choose (or get closer to achieving) for themselves and their beloved the kind of life that they want.
  6. From what I have seen, there are CEOs who have no idea of the nonsense that people suffer from in their organisations (and nor do they care). Workplace surveys to gauge employee sentiment are often fake because HR will coerce and bully people into giving management high scores as surveys are never genuinely anonymous.

Conclusion

Executives dedicate themselves to their organisations and deserve recognition. However, fairness and consideration  for all workers is not a given in every organisation. A remuneration metric like the one I propose will better ensure equity for workers and economic growth for all socioeconomic levels of the population.

I am keen to know what you think. As we are in the era of crowd sourcing and collaboration, can anyone further build on my idea?

Maria Fok has corporate experience from ASX listed, government and global organisations and a passion for speaking and writing about how businesses may accelerate their progress, improve and innovate.

Comments

3 comments

  1. Avatar

    Jonathon posted on August 29, 2018

    Very well written. I echo some of the observations Maria has detailed with my own work history.... especially in the larger multi national companies, where the CEO can be quite disconnected from the worker bee. Could this also apply to our government officials. I've often thought about politicians working on a bonus scheme, if they deliver what they promise under budget they get a % bonus. Though I do wonder if that would attract or detract from being a politician. reply

  2. Avatar

    Mark Schroeder posted on August 30, 2018

    Outside of big corporations' CEOs, I don't hear too many people supporting the ludicrous levels of pay they enjoy, and I agree the recruitment argument simply doesn't support these levels either. Finally I'd say that stratospheric Executive packages undercut investment and preclude the possibility of trickle down. I don't understand how an exec taking tens of millions out of a company in pay can say s/he is genuinely committed to the interests of the business. If we're in the mood to regulate, I'd add a KPI component around sustainability - accepting different industries have different environmental impact, you'd use current levels to create benchmarks, then ratchet a component of executive pay to performance in this area. Given we're beset with bonus-hunting short-termism at the top, at least that way it's in the broader interest! reply

  3. Avatar

    Satchan B posted on March 5, 2019

    Great article Maria and I agree with the proposed requests. However, it would be interesting to see how CEOs respond to this proposal, as no one would like to have their remuneration packages to be touched, but if they want to have a better staff retention and want the success of the company, they should consider the proposed idea of remuneration metric. reply

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