A study has found that Australians think multimillion dollar pay packets for CEOs are unethical and that action also needs to be taken to rein in bad behaviour.
Nearly 80% of Australians believe high CEO salaries are unethical, according to the second annual Governance Institute of Australia Ethics Index which surveyed more than 1000 people.
Three quarters (77%) say a CEO salary of $3 million a year — or 50 times the average income — is unethical. The pay of major bank CEOs run from about $8 million to $12 million a year.
But what should CEOs be paid? About half (55%) of those surveyed believe an annual pay packet of $660,000 is unethical but most think a $300,000 package is okay.
CEO pay has become a big issue for shareholders with votes at annual general meetings against remuneration reports.
The Commonwealth Bank is currently at first strike on its remuneration report. A second vote would mean a spill of current board directors. CEO Ian Narev was paid $12.3 million in 2016.
Australians are also unhappy with the ethical standards of large corporations and their CEOs, particularly in banking and finance, as well as parliamentarians, unions and large sections of the media.
Here’s how the various sectors rate, according to the latest ethics index:
Governance Institute chief executive Steven Burrell says there’s widespread community concerns about the lack of ethics, transparency and accountability in financial services.
The May federal budget announced a series of measures, the Banking Executive Accountability Regime, designed to make bank senior executives more accountable, including withholding bonus pay.
The move followed widespread concern that no senior bank executive had lost their jobs because of a banking scandal.
“But one has to wonder if a Royal Commission is the only way we can restore community trust in the financial services sector?” says Burrell at the Governance Institute.
The survey also showed that most think company boards should act in response to poor personal behaviour by CEOs and senior executives.
More than half (56%) favoured intervention in all ethical situations while a another 35% wanted intervention when the personal behaviour has a direct impact on the business.