Wednesday, January 11, 2012

Paying the Price

I make it a policy to not call someone a liar unless I'm 100% certain.

That might be the lawyer in me, but regardless it's probably a good policy for life.

In any event, this post is as close as I've come to just coming out and saying it.  The motivation was this piece from Andrew Clennell, the Terror's State Political Editor.
Just as an aside, and I can't just let this go by, this is the first paragraph:
See how O'Farrell's name is hyperlinked?  Do you want to know where it links to?
I'll leave you to make of that what you will.

In any event, the article is part of a "campaign" the Terror is running about salaries for senior Public Servants.  Yesterday we had this piece, by Geoff Chambers:
There are a lot of things to say about these articles.  The first is that they are an awful example of shoddy, lazy, and potentially deceptive reporting.

I've never wanted this blog to be a blog about the media. There are a few reasons, not the least of which are that there are already plenty blogs about the media and its failings.  If that's your interest, I commend  to you News With Nipples and Politically Homeless.

I'm interested in the media, but only insofar as it plays a major role in politics - the perception of the parties, what the media does and doesn't pick up on, and even the bias in play.

The reason I am breaking my "Don't Write About the Media" rule today is because these two pieces are a perfect example of how the media can misconstrue and obfuscate in an attempt to push an agenda. And it's an agenda that I fancy we'll be hearing a great deal more about.

The first thing the pieces do is confuse the executives at State Owned Corporations with those working for Departments.

Today's piece fails to explain that State Owned Corporations are just that - companies owned by the state.  Like any company, their directors are appointed by the shareholders (Treasurer Mike Baird and Finance Minister Greg Pearce).

These companies are competing against all the regular private companies for executive talent, and therefore have to pay the "going rate".

By way of comparison, let's look at some of the salaries paid to executives at privately owned companies.

The Australian Council of Superannuation Investors has put together a quite excellent report on CEO pay that can be found here. It looks at incomes for the CEOs of the top 100 companies in Australia and helpfully breaks the income into fixed salary and short term incentives, and then a total including long term incentives.

These are the numbers for fixed salary:
Short term incentives:
Total including long term incentives:
It's a fairly simplistic analysis, but you can see that the average CEO of a top 100 company gets a touch under $5 million.

By contrast, the Tele tells us this about the state owned company executives in yesterday's piece:
And, further down:
We're told that they earned $3.5 million in bonus and increases, but not told how much their base pay was, which makes it a fairly pointless statistic. We're also told that the top earning state owned company executive earned less than ONE FIFTH of the average.

The story is a whole lot less shocking in that context. But I'll come back to that later.

Let's look at what today's story had to say about the Department heads.
In this story the Tele pretends to "hold O'Farrell to account" in relation to the salaries paid to these department heads.  Fair enough.

A few points that are glossed over though. Firstly, these pay rates are all determined (for the most part) by the NSW Remuneration Tribunal. Each job has a set Remuneration Level, and the pay applicable to that Remuneration Level is set by the Tribunal.  You can see their determination for this year here.

It is interesting to note that the pay increases for this year were capped at 2.5%, as they were for the rest of the NSW public service

The report explains that there are a few different forms of remuneration.  The first is the base pay, as per the following table:
As well as that, an executive can be paid either a recruitment allowance or a retention allowance.  This gives the government a little flexibility, to try and hold onto those executives that they feel they need. Depending on the executives remuneration level, the recruitment allowance can range up to $43 000.

In justifying the pay rates, the O'Farrell government was quoted as follows:
The range of between $402 000 and $464 600 is the prescribed range for those on Band 8.  The contrast is being drawn to the salaries detailed in the first paragraph:
What this contrast does not make clear is the discretion provided by the Remuneration Tribunal to pay a recruitment or retention bonus.  If the government chooses to pay the full $43 000, that brings the maximum up to $507 000, which is above everyone's figure except for Chris Eccles, head of the Department of Premier and Cabinet and Rob Mason, head of RailCorp.

How is it possible that these two are paid more? The Tele doesn't tell you.

As far as Eccles goes, it's very easy to find out.  I had never been to the Remuneration Tribunal's website before, and it took me less than a minute to find this report.
And, further on:
In short, an Independent Authority fixed Mr Eccles wage.  An independent authority!

Now, maybe Andrew Clenell didn't know about this report.  Maybe the 2 minutes it took me to find it was all a little too much effort.

On the other hand, maybe he knew about this special determination and understands perfectly how recruitment and retention bonuses work, and decided to conceal that fact to write a more shocking story.

It's not for me to say, and no doubt you'll reach your own conclusion.

As for Rob Mason, the answer is I don't know. I've had a detailed look through the Remuneration Tribunal's website, and I've reviewed the legislation and the RailCorp Annual Review, and I can't work it out.

Either Clenell knows and isn't telling, or he didn't bother to ask when he sought comment from the government, or he had it explained to him and has decided not to share it.

Either way, a pretty shabby effort.

The point I'm trying to make in a roundabout way is that these stories are all about the Telegraph seeking to drum up outrage about the pay packets these executives are taking home.

I've written on many occasions about the anger various groups felt (and no doubt continue to feel) about O'Farrell limiting their pay increases to 2.5%.  Most people will not be aware that these executives salaries were limited to the same increases.  They're not aware because Clenell has chosen not to mention it.

By the same token, the salaries paid to the state owned company executives do seem large, until they are stacked up against those paid to the Top 100 companies.  But that kind of analysis would have distracted from the main thrust of the story: these people are getting rich and you're getting screwed to the wall. Cue outrage and (at least, according to the plan) more sales of the Tele.

Of course, the problem for O'Farrell is that almost no one will go to the Remuneration Tribunal website and read these reports.  And it may be that this battle is one that a sitting government will always lose, because the government's argument will always be about context, and an argument about context seldom triumphs over an argument designed to breed outrage.

And at a time when the public is being whipped into a frenzy about cost of living, outrage come cheap. Just read the comments on those articles.

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