EXECUTIVE pay is a hot topic, but one of ANZ's most senior executives says he is mystified that Australians love hearing about the millions paid to athletes and movie stars, but slam the remuneration of corporate leaders.
"We seem happy and even proud when our sports people make it onto the list of the top 20 paid people, or similarly when our entertainers make it on Hollywood's best-paid list," ANZ Australia chief executive Phil Chronican told an American Chamber of Commerce in Australia lunch yesterday.
"Yet for some reason when people are managing large complex businesses it is seen as excessive."
Mr Chronican said the issue was not whether an executive was paid $1 million, $3 million, $5 million or more, but why.
"Just like sports people and entertainers, senior executives' careers do come to an abrupt end," he said.
Mr Chronican said the disclosure of the salaries of executives of listed companies was important for transparency.
"Maybe we should look to extend the disclosure to other groups who are in positions of power in their community, including those who are managing public superannuation savings."
While acknowledging that for most Australians, "any level of executive pay looks high, even stratospheric", Mr Chronican, who earned a combined $2.2 million in compensation in 2011, said that the real issue was how big were the risks that bankers were hired to manage. "What returns do they earn shareholders? How do they serve customers? Are they good employers?"
In a wide-ranging speech, Mr Chronican, who oversees ANZ's domestic operations, said many Australians were not feeling the benefit of the mining boom, which had contributed to the change in consumer activity in recent years.
"Despite our strong economy, many Australians feel worried about our prospects in the face of uncertainty in Europe and many, particularly outside the fast lane of the mining and resource sector, feel they're not seeing the benefits," he said.
Although Australia continued to grow thanks to Asian demand for resources, the country was undergoing "a period of quite painful structural change", he said. Bank growth would be hit by slowing business and household credit demand, which remained at a 30-year low, while household savings were at a 30-year high.
The rising cost of banking would reduce shareholder returns from banks in the future, he said.
"Banking is going to be more expensive due to the higher costs of funds and higher regulatory requirements," he said.
Mr Chronican also noted an anomaly in overseas views of Australia and its real estate market.
"Overseas investors have a very odd set of views about Australian property prices," he said.
"They on one hand look at the stability and take a lot of comfort from it. The other is they cannot believe Australia was able to not have a property price collapse," Mr Chronican said.
Frequently Asked Questions about this Article…
Why is ANZ’s Australia chief Phil Chronican mystified about public anger over executive pay?
Phil Chronican told an American Chamber of Commerce lunch he’s puzzled because Australians celebrate high pay for athletes and entertainers but criticise corporate leaders. He says the issue isn’t the dollar figure but why executives are paid — the risks they manage and the outcomes they deliver for shareholders, customers and employees.
What did Phil Chronican say about disclosure of executive salaries and transparency for investors?
Chronican said disclosure of listed-company executive salaries is important for transparency. He suggested possibly extending disclosure to other influential groups, such as those managing public superannuation savings, so investors and the public can better understand who’s in positions of power.
How much did Phil Chronican earn in 2011, according to the article?
The article states Phil Chronican earned a combined $2.2 million in compensation in 2011.
How might rising banking costs affect shareholder returns at banks, according to the ANZ executive?
Chronican warned that higher funding costs and increased regulatory requirements will make banking more expensive, and that rising costs of banking are likely to reduce shareholder returns from banks in the future.
What did Chronican say about the wider benefits of the mining boom for everyday Australians?
He said many Australians, especially those outside the fast lane of mining and resources, don’t feel they’re seeing the benefits of the mining boom. He described the country as undergoing a period of painful structural change despite continued growth driven by Asian demand for resources.
What did the article say about household savings and credit demand in Australia?
Chronican noted that household credit demand was at a 30-year low while household savings were at a 30-year high, signaling more cautious consumer behaviour that could weigh on bank growth.
What was Phil Chronican’s view on overseas investor perceptions of Australian property prices?
He said overseas investors have an odd set of views: they take comfort from the stability of Australian property prices, yet are surprised Australia hasn’t experienced a property price collapse — an inconsistency he highlighted in foreign perceptions of the market.
As an everyday investor, what should I consider when evaluating executive pay in a bank like ANZ?
Based on Chronican’s remarks, consider why executives are paid what they are: assess the risks they manage, the returns they deliver to shareholders, how they serve customers and whether they are good employers. Transparency of disclosed pay can help you judge whether compensation aligns with performance and long-term shareholder interests.
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