Friday, September 16, 2011

Poetic justice. Pay restraint for RBA governor


Commonwealth Bank chief executive Ralph Norris: $8.6 million

Reserve Bank governor Glenn Stevens: $1.05 million

APRA Chairman John Laker: $800,000

ACCC Chairman Rod Sims: $700,000

Treasury Secretary Martin Parkinson: $503,220

Prime Minister Julia Gillard: $366,366

Treasurer Wayne Swan: $288,865

US Fed chairman Ben Bernanke: $214,000

Australian dollars. Bloomberg, Remuneration Tribunal, annual reports

The government’s million dollar man, our highest paid public servant, will get to keep his pay for as long as he is in the job. But his successors won’t be so lucky.

Treasurer Wayne Swan revealed yesterday he had stripped the Reserve Bank board of the power to set its governor’s pay, handing the authority instead to the remuneration tribunal.

But a side letter to the board from special minister of state Gary Gray guarantees governor Glenn Stevens can keep his $1.05 million per annum package until his term expires in September 2013.

The Reserve Bank board decided on a “sizable” $239,000 boost in governor Stevens’ pay as the financial crisis unfolded in late 2008 but didn’t tell the Treasurer until nearly a year later. A furious Mr Swan wrote back that in future he expected the bank to “discharge its powers with an emphasis on ensuring salaries are adjusted to be in line with community expectations”.

The quarter million dollar boost amounts to most of Treasurer Swan’s entire $288,865 salary... Mr Stevens takes home five times as much as the head of US federal reserve and twice as much as the heads of the Treasury and prime minister’s department. Prime Minister Julia Gillard earns $366,366 - around one third the governor’s package.

Asked to justify the increase at a parliamentary hearing in August Mr Stevens said: “I am not sure I can help much there. I do not set my own pay. The board set it.”

“They took their decision, and I take what I am given, like anyone else in the country.”

Mr Swan believes the increase weakened the ability of the governor to speak out excessive pay rises and was out of step with government moves against high executive salaries.

In an interview with Bloomberg News published yesterday he said he had “put in place a set of arrangements that mean future decisions taken about those salaries will be in the context of other salaries paid to comparable people in the public sector”.

"I have taken that action so that when the board takes its decision, it takes its decision within a framework set by government."

Prime Minister Gillard endorsed the Treasurer’s action saying she would “absolutely agree with the words of the deputy prime minister”.

The change was gazetted a month ago. At the same time the special minister of state wrote to the Bank board saying Mr Stevens could keep his salary while he remained in the job.

His successor’s salary will be in a band set by the tribunal. board have the power to determine the exact salary paid to the governor within that band.

In July Mr Swan introduced a “two-strikes rule” that gives shareholders the right to vote on a motion to spill a company’s board if its remuneration report receives a no vote of 25 per cent or more at two consecutive annual meetings.

Although large by the standards of his contemporaries overseas Mr Stevens salary package is approached by other heads of statutory authorities. The Future Fund annual report reveals its highest paid executive takes home between $925,000 and $939,999. The remuneration recently lifted the salary package of the head of the Australian Prudential Regulation Authority John Laker to $800,000 and those of the heads of the Securities and Investments Commission and the Competition and Consumer Commission to $700,000.

The tribunal said one the factors it took into account was the need for comparability with the salary of governor Stevens.

Published in today's SMH and Age

Letter From Donald McGauchie to the Treasurer - 18 September 2009

Letter From the Treasurer to Donald McGauchie - 15 September 2010

Letter From Jillian Broadbent to the Treasurer


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