The curious case of Mr Ahmed Fahour

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.

Paul Romer at the World Bank: a re-assertion of US influence?

When Paul Romer became the Chief Economist of the World Bank last month, reactions from the media were largely positive. However, to Helmut Reisen, former head of research at the OECD Development Centre, Romer’s ascendancy reflects the unfortunate reversal of a welcome practice of appointing the World Bank’s Chief Economists from emerging economies (at least in terms of heritage if not necessarily in terms of institutional affiliation) as Justin Lin and Kaushik Basu were. It is likely, as Reisen suggests, that one is witnessing the re-assertion of US influence on a major multilateral institution. Perhaps this is a reaction to the putative influence of countries from the BRICS, most notably China, as new sources of development finance.

The IMF and fiscal consolidation: a case of business as usual ?

Three leading IMF economists (Jonathan Ostry, Prakash Lougani, Davide Furceri ,2016) offer the following refreshing thoughts on fiscal austerity as part of a general critique of neoliberalism:[1]

Austerity policies … generate substantial welfare costs …and worsen employment and unemployment. The notion that fiscal consolidations can be expansionary (that is, raise output and employment), in part by raising private sector confidence and investment, has been championed by, among others, Harvard economist Alberto Alesina in the academic world and by former European Central Bank President Jean-Claude Trichet in the policy arena. However, in practice, episodes of fiscal consolidation have been followed, on average, by drops rather than by expansions in output. On average, a consolidation of 1 percent of GDP increases the long-term unemployment rate by 0.6 percentage point and raises by 1.5 percent within five years the Gini measure of income inequality … In sum, the benefits of some policies that are an important part of the neoliberal agenda appear to have been somewhat overplayed….In the case of fiscal consolidation, the short-run costs in terms of lower output and welfare and higher unemployment have been underplayed, and the desirability for countries with ample fiscal space of simply living with high debt and allowing debt ratios to decline organically through growth is underappreciated.

So far, so sound. But…what has the IMF proffered in practice through its bilateral surveillance advisory services that are typically channelled via the Article IV consultations? Brad Setser from the Council on Foreign Relations thinks that there is a disconnect between what the Fund preaches – or least some of its more progressive voices do – and what it practices in operational terms. He notes:

…the Fund is advocating a 2017 fiscal consolidation for the euro zone, as the consolidation the Fund advocates in France, Italy, and Spain would overwhelm the modest fiscal expansion the Fund proposed in the Netherlands (The IMF is recommending that Germany stay on the fiscal sidelines in 2017).

The same seems to be true in East Asia’s main surplus economies (China, Japan, Korea)…[2]

A 2016 ILO study – which I happened to supervise – found that in more than 90 out of 100 low and middle-income economies, the IMF Article IV consultations recommended fiscal consolidation. [3]

 

1 https://www.imf.org/external/pubs/ft/fandd/2016/06/pdf/ostry.pdf

 

[2] http://blogs.cfr.org/setser/2016/08/22/imf-cannot-quit-fiscal-consolidation-in-asian-surplus-countries/

 

[3] http://www.ilo.org/wcmsp5/groups/public/—ed_emp/documents/publication/wcms_464257.pdf

 

Women on Boards: The Glass Ceiling?

In the most of developed Western democracies, women and men are present  side by side in politics, government, sports and business.  Australia is far behind in terms giving equal share to women, at least in politics and business. Women comprise 46 per cent of all employees in Australia. But they hold only 14.2 per cent of board chairs, 23.6 per cent of directorships, and 15.4 per cent of CEO roles. Although  there have been recent calls for putting more women in corporate boards and  there had been at least one attempt to introduce a bill requiring more women  on corporate boards, only time will tell how far we can go. Is it the “glass ceiling”? Is it the “competency gap”? Or what?

One is a token, two is a presence, three females on a board is a voice.

Governance of Immigration: Should Australia Ban Muslims?

The ongoing civil war in Syria, the unrest in the Middle East, and acts of violence in  Western countries  in  which Muslim names have been found to be involved – all  have triggered some quarters within the conservative side of politics and  a small but vocal section of the community demanding Australia to ban Muslim immigration. Moreover, a poll suggests that some sections of the Australian community are worried about peace and stability in Australia because of Muslim migration. Their main argument is Muslims do not assimilate to the Australian society or for that matter Muslims do not share Western cultural values. Is it really an argument?

What is assimilation? The Merriam-Webster online dictionary states “to assimilate” is “to cause (a person or group) to become part of a different society or country; to adopt the ways of another culture; to fully become part of a different society, country, etc.” When migrants arrive in their adopted land, surely some assimilation takes effect immediately. For example, the types of food they eat, the look of the dwelling they live in, and the nature of the schools their kids attend. In many cases, their first language becomes a ‘’foreign” language over time because of its limited functionality in the adopted land.  Other aspects of assimilation may be slow and may take generations. No social scientist has proclaimed a time frame within which an immigrant group could be assessed whether the group assimilated into the new society and culture.

Why should the degree of ‘assimilation’ be a condition for immigration? Surely, there are enough checks and balances in the immigration system. For example, apart from other conditions depending on visa category, all applicants for immigration visa require health check-up before their applications can be finalized. All applicants need to provide evidence that they are persons of good character, and they have no prior conviction of any criminal offense.  After all of these, if any immigrant gets involved in a crime, there are laws to deal with it.

Again, how are we going to predict to what extent and at what rate the new immigrants are going to assimilate into the broader society? If all Australians look the same, eat the same food, dress up exactly in the same way and speak only English, life is going to be very boring. Surely, you do not wish to eat the same meal every day for dinner! Some variation is desirable. Diversity is not a defect; it is the strength of a society.

Now, let’s ask ourselves: Are Muslims useful to the world at all? Yes. Muslims and Arabs had their fair share of contributions to the human civilization. Next time you think of Algebra, you may wish to thank the Arabs. Next time you brush your teeth, the concept of using twigs (miswak in Arabic) to clean teeth came from the Egyptians. Next time you need to go to an optometrist, remember Muslims invented magnifying glasses and “reading stones” from which spectacles were developed.  Arabs invented the concept of hospitals. Coffee, originally from Africa, was spread to the rest of world by Arab merchants.

In Australia, Muslims contributed enormously to the growth and development of early Australia. From the 1860s to the early 1900s, camels acquired from Asia and the cameleers recruited from Afghanistan, Baluchistan, Egypt, Turkey and other countries became the driving force in the exploration and development of the interior Australia. Muslims are contributing to contemporary Australia, too.  Just to name a few, leading Muslims in the corporate sector include Ahmed Fahour, CEO of Australia Post, and John Ilhan, deceased founder of Crazy John’s mobile retailer. In sports, we have Fawad Ahmad, Usman Khawaja, Cory Paterson, Anthony Mundine and Carmen Marton and others. Surely, these athletes and sports personalities made all Australians proud.

What Senator Pauline Hanson is saying is nothing new. Time and again, people of non-European ethnicity faced discrimination and racism from European settlers and their descendants. For instance, the cameleers from Asia, despite their huge contribution to Australia, faced deep-rooted discrimination and racism. In many outback towns, there were segregated areas for Europeans, Aboriginals, and cameleers. Cameleers rarely had any avenue to interact with the Europeans. After the Immigration Restriction Act of 1901, many cameleers were denied re-entry into Australia, and many were denied naturalization due to their Asian origin.

Senator Hanson appealed to the Muslims to go back to the country where they came from. Why? What about those who were born here? Could the First Peoples of Australia say the same thing to the European settlers? Besides, Australia became multicultural the day Europeans settled here because they did not adopt or assimilate to the Aboriginal culture. Pauline Hanson and the extreme conservatives moan that Muslims don’t assimilate, Muslims don’t fit in. Assimilate to what? Culture is not a black and white thing. Culture changes very slowly over time. Surely, the immigrants’ life style is to some extent different from what they had in their native country. They do not lead life exactly the same way they lived in their native country. Their life here is influenced by their surroundings, their neighbors, their friends, and work colleagues. Is this not assimilation? When I came to this country some 20 years ago, Bengali was my first language. Now for all practical purposes, English is my first language. Is this not assimilation?

If Australia wishes to prosper in the age of globalization, if it wishes to trade with the vast majority of countries in which English is not the first language, then there is no alternative but to embrace diversity. Banning Muslim immigration will only constrain Australia’s acceptance as a trading partner in emerging Muslim countries. A discriminatory and closed system of immigration will throw Australia only into the back waters of the global economy.

September 27, 2016