Thursday, September 28, 2006

CEO Salaries, Tax & Australian Values

There has been much criticism of Telstra CEO, Sol Trujillo's, bonus of $2.6 million. This gave him a total "package" of $8.71 million.

$2.6 million bonus represents a bonus rate of almost exactly 30% of salary, leave and superannuation. mmm ... most "ordinary Australians" would be willing to accept that every year. An ethical company would decide what amount of money should be given as a bonus, and share it among ALL its employees.

Criticism has centred on what "performance criteria" the bonus was paid. Among the justifications was that Mr Trujillo devised and is executing a business plan. Excuse me! - isn't that his job?? Others, including some in the government, have questioned whether a bonus should have been paid when the share price has dropped considerably and the company lost more than $45 million in value EVERY DAY.

But what about other CEOs? Many are foreign, coming from the USA, NZ, Scotland & other parts of Britain. The Federal Government generously gives them tax breaks - like no capital gains on shares, for example. So, the savvy CEO takes a sizeable chunk of the package as shares, later sells them, and pays NO TAX on them.

The Federal Government does this while it talks agues forcefully that people who come to Australia should obey Australian law and adopt Australian values (not clearly defined, but a nice term, which appeals to the electorate as we get closer to an election).

I respectfully suggest that foreign CEOs should pay Australian taxes, under Australian law, in keeping with their commitment to "Australian values". John Howard and Peter Costello need to fix this, by amending the tax law to remove the tax lurks given to foreign CEOs that are not given to John Howards "ordinary Australians".

The Analyst