Tom Elliott, 3AW announcer and Managing Director and co-founder of Melbourne based hedge fund MM&E Capital Limited has joined the growing throng of vocal opponents to Australia’s highly paid banking oligopoly.
In line with the Obama administration’s plan to impose a cap on executive pay for firms that take government aid money, Elliott is calling for a limit to be placed on the salaries of Australian bank executives. He argues that the multi-million dollar pay packets currently being handed out to the banking industry’s top echelon cannot be justified in these tough times.
Elliott, son of former Liberal Party president, John Elliott, maintains that bank funding and deposit government guarantees means risk is now being carried by taxpayers, which renders bank executives “public servants”.
The amount of the salary cap is at this stage irrelevant, says Elliott. “It’s more the symbolism, which says, you’re now effectively a public servant.
“The moment you don’t want to be a public servant and you reckon that your bank can wash its hands of government support you can pay yourself whatever you want.”
While Australian banks have not yet had to resort to US and UK style bailouts or nationalization Elliott argues that the Federal Government’s guarantee is a thinly disguised bailout.
Claiming that bankers spend much of their time lobbying the Federal Government and boasting about what a great job they’re doing and bemoaning the awful state of affairs in the international credit markets, Elliott declares “I think it’s wrong”.
“I’m a complete free marketer,” he says.
“I don’t have any quarrel with people earning millions of dollars.
But I do have a problem when as a taxpayer I’m the one paying for it.”
Elliott is happy to see CEOs receiving generous salaries when they’re doing a great job. But he maintains that when a company gets to the stage where it can’t function without the government propping it up it loses the right for its top executives to earn massive amounts of money.
He refers to car dealers (some of whom have been bailed out by government) and the commercial property industry (which is on the cards for a bailout) saying that the executive salary cap argument should extend to any firm that requires a government bailout.
“What the government doesn’t understand is that it’s putting banks in a privileged position and putting all the non-banks out of business,” he told Lending Central.
“When this credit crisis is over the banks will be so strong because all their competition will be gone.”
Elliott does not support the call for a ban on golden parachutes, which have been described as “indecent, excessive, unnecessary payments that foster greed or are a function of greed” by Philip Higginson, managing director of ProNed Australia, who last week launched a survey of company directors.
Arguing in favour of golden parachutes Elliott maintains that they are a valid incentive for executives to join a company that may have only a 50/50 chance of survival through no fault of theirs.
What do you think, should there be a cap on bank executives’ salaries or can you see justification in them remaining unrestricted?