Corporate Tax Cut Needed Improvement

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Author: Maria Fok

Like all good Australians I am passionate about my career and the prosperity of our great nation; not just locally but on the global stage. The proposed corporate tax cut was a well-intentioned effort to incentivise businesses to employ more Australians and stimulate reinvestment in our economy, but as we all know, it didn’t pass.

Personally, I think the proposal could have done with some further enhancements. Based on experience, more profit after tax for companies could result in executives and board members receiving higher pay or other perks, while the average Australian worker may see few real advantages.

If the government ever makes another attempt at reducing the corporate tax rate, it will need to make sure more Australians reap the benefits through stable employment and increased career opportunities.

My proposed solution 

I think businesses should introduce a metric whereby a CEO’s pay cannot exceed a certain ratio, when divided by a weighted average of the number of workers in an organisation and their pay, at every level.

Organisations are complex and come in all shapes and sizes, so I do not attempt to propose a simple formula in this article. I presume the government will have econometrics staff who can work through the details of how such a calculation can be done.

My goal is simply to convey the key concept that executive remuneration needs to be more aligned to the remuneration of staff in the organisation as a whole.

My reasons for implementing such a ratio are as follows:

  1. After many years in corporate life, I have come across many CEOs and board members. At the end of the day, they are only human.
  2. My proposed ratio calculation means that a CEO’s remuneration must stay in sync with what their staff (from the bottom up) receives. Every CEO depends on the people in their organisation to succeed. For example, if there is a huge blue-collar workforce in their organisation, the CEO’s remuneration has to reflect that mix of people.
  3. I once worked for an iconic Australian brand and the CEO was paid in the past year in excess of $20 million. And yet I have former colleagues who are still with this company who cannot even find a desk to sit at due to ‘activity-based desking’. This is promoted to staff as some form of modern corporate cultural innovation, but (in reality) is an attempt to cost cuts.
  4. The argument that lower remuneration means a company will fail to attract high calibre CEO candidates is nonsense. Even if CEO and board remuneration are adjusted using my ratio, I am sure there will still be a pool of talent willing to do the job for less or an adjusted amount of money. At that level on Maslow’s Pyramid, no executive is on the bread line.
  5. A person who does not have the passion to do their utmost to foster growth and nurture their staff at every level does not deserve to be a CEO in the first place. Employees who are paid fairly will have more agency to choose (or get closer to achieving) for themselves and their beloved the kind of life that they want
  6. From what I have seen, there are CEOs who have no idea of the nonsense that people suffer from in their organisations (and nor do they care). Workplace surveys to gauge employee sentiment are often fake because HR will coerce and bully people into giving management high scores as surveys are never genuinely anonymous.

Conclusion

Executives dedicate themselves to their organisations and deserve recognition. However, fairness and consideration  for all workers is not a given in every organisation. A remuneration metric like the one I propose will better ensure equity for workers and economic growth for all socioeconomic levels of the population.

I am keen to know what you think. As we are in the era of crowd sourcing and collaboration, can anyone further build on my idea?

Maria Fok is an inaugural winner of the PASA Category Manager of the Year Award 2015.  She was our keynote speaker on culture and innovation at Confx and has corporate experience from ASX listed, government and global organisations. This article also ran in Inside Retail Australia here

 

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