As media and commentators are busy analyzing whether Mr Ahmed Fahour was pushed or he jumped, the crux of the matter is executive pay. Mr Fahour resigned this week amid controversy over his $5.6 million pay-packet. ABC news radio this morning (24 February 2017) dubbed him the ‘highest paid postman in the world.’ Prime Minister Malcolm Turnbull commented that the pay is excessive. Other political leaders such as Senator Nick Xenophon commented “that’s a lot of postage stamps…” Senator Pauline Hanson was also disgusted with the pay-packet which consists of $4 million salary and $1.2 million bonus.
Whether Mr Fahour is a postman or not, he should be given the due credit of turning around Australia post from last year’s $222 million loss to $36 million profit this year. This is no mean feat – an improvement of $258 million in one year! So what went wrong with Mr Fahour?
There are always two sides of the argument. As questionable pay practices are abundant, there is also an element of jealousy when we talk about executive pay. The average citizen or the average shareholder is baffled by CEO pay. It appears as a mystery why CEOs are paid so much. CEO pay process is highly complex. Firm size, firm profitability, firm growth, firm’s business risk, and business complexity – all contribute to CEO pay.Besides, we need to value the talent and the strategic leadership they bring to the corporation.
Whether we like it or not, although Australia Post is a government-owned entity, it has to make a profit, otherwise taxpayers would be subsidizing its operations. And Australia
Post has to survive in a world of digital disruption where we are increasingly abandoning the tradition ways of communication (‘snail mail’), thus adversely affecting postal business. If Mr Fahour had been the CEO of a public-listed company, he would have no issue of receiving this pay-packet. Further, it is wrong to compare his salary with other government executives or political leaders such as the Prime Minister because company CEOs and political leaders (or government officials) have very different jobs.
While there is legislation such as the “two strikes” rule to rein in questionable pay practices ( see Monem and Ng, 2013) in public-listed corporations, there is no similar regulation for government-owned entities which are expected to be self-sustained and economically viable. Hence, whether Australia Post is a government office like Centrelink or a profit-oriented business corporation needs to be settled first.