Why not a fair and transparent contest

Published in The Australian Financial Review

In “Executive excess is not out of control” (Letters, March 30) Owen Thomas remarks that any system that sets all salaries, “will distort the market and result in inefficiencies in the allocation of resources”.

Quite true, as illustrated by the current system of CEO selection and remuneration. Industry captains are selected in darkness, the deal done behind closed doors and shareholders get a toothless non-binding vote after the deal is done. It’s a rigged market in comparison with the open and transparent share market that sets the value of the listed companies the CEOs manage.

How about a fair market transparent contest that naturally bids CEO pay down when too high and up when too low and pays nothing to remuneration consultants? Such as a process that requires boards to advertise the CEO position, allow anyone to nominate and present his or her credentials and asking price to shareholders and invites shareholders to select the winner with an optional preferential secure online binding vote with automatic transparent audit trail. Free market capitalism failed us because we never had it.

The top end of town will laugh at this idea — so distorted is the current system

Published version - AFR -02 Apr 2009

Tags: capitalism, ceo, online vote, Online voting, rigged market, salaries