Dollars and Sense?

As the old Jewish saying goes, ‘There’s no profit in looking in another man’s pocket.’ By and large, I’ve done my best in life to avoid doing that, but a newspaper article the other day forced a bit of a rethink. A CEO of one of our leading banks is now being paid over $4 million a year; stick a few perks in the mix and you’d probably end up nearer the $5 million mark. Big salaries are an accepted part of American corporate life; what I’m asking is, are they a healthy thing for a small country like New Zealand? We all know there’s a poverty gap, but up to now it hasn’t been quite so sharply defined. There’s a certain amount of resentment out there towards the banking and finance industries and, in my view, it’s largely justified. Various governments throughout the world have been called upon to bail out some of these corporations, then in all their wisdom handed the rescue package back to the same people that caused the problem in the first place. Yet, despite the recent world-wide economic recession, banks in New Zealand and Australia continued to produce healthy balance sheets, while the rest of us live in the shadow of the next round of ‘belt tightening’.

The Bucks Stop Here

We live in a fairly classless society; most New Zealanders don’t get too uptight about privilege and wealth, but for me there’s something unhealthy about multi-million dollar salaries. Just doing the maths is scary enough: in three days this guy earns what Mr or Ms Average makes for a year’s work and in three months draws more than that same worker can hope to save in a lifetime. He has access to the best legal and financial advice and as a result probably pays proportionally less tax than mere mortals on a wage courtesy of tailored family trusts and overseas investments. The minor problems, like budgeting for transport, holidays, medical insurance and retirement savings don’t exist for him; those irritating details are built into his employment ‘package’. Unless he gets caught with his hands in the till, he’s assured of a ‘golden handshake’ at the end of his tenure and in the event of total failure a ‘golden parachute’ awaits as part of his ‘exit strategy (you’ve just got to love corporatespeak).

Profit and Loss

Don’t get me wrong, it’s not all their fault, it’s just the system. They serve the board, the board serves the shareholders and, as long as the dividends stack up, everyone’s happy, except perhaps those lower down the pecking order. The rewards of ‘cost cutting’ and ‘outsourcing’ may look good on paper but balance sheets don’t show social costs. A few years ago in my city, a local rail workshop tendered for the construction of freight cars for NZ Rail. Despite strong arguments for internal contracts being awarded to benefit the local community, the contract was given to a Chinese company with the resulting loss of hundreds of jobs in a city already struggling to cope with internal debt. Doubtless the architect of that fiasco got a ‘performance bonus’. In recent years, we’ve seen solid national companies depart for the benefits of cheap offshore labour while countless others cut costs by ‘outsourcing’ information services: good stuff for the profit margin, but not much consolation to those who don’t dwell on the top floor. As a small country, we are in the unique position of being able to re-assess our stance on profit and unproductive wealth. I’m not anti-profit; I just think that, like power, it needs thoughtful direction and regulation to produce the wide ranging benefits it logically should. Paying a rest home worker $12 an hour to clean and care for our elderly is clearly unjust, but to pay a CEO $2,500 an hour to move and amass money seems to me to be almost obscene.