SOL PIPES UP

Telstra CEO Sol Trujillo's foray into the debate about executive salaries in companies being propped up by government money is interesting.

Earlier in the week Telstra CEO Sol Trujillo told a conference in Brisbane, "If you're the executive of a company that chooses to become government-dependent in terms of your future, they need to accept certain limitations on their compensation (salaries) because they're using taxpayer money".

Is there a company in the country that has been more dependent on the Australian government and people than Telstra?

As he reflects on his earnings in the last financial year ($13.4 million), he might like to consider that at Telstra, he took over a company that was previously a government monopoly that inherited a huge amount of benefit from that priviliged position including until recently a continued government stake. Australia's regulatory framework has long rewarded Telstra. The Howard government was especially torn between the interests of the Australian economy and those of the mum and dad Telstra shareholders to whom the great Telstra share investment dream had been sold.

Telstra's share price and Mr Trujillo's package have benefited enormously from government decisions including the decision of the Future Fund to invest heavily in Telstra shares. The Future Fund holds a 16% stake in Telstra that at last check was valued at around $7.6 billion.

The wider story though is this. Every company is dependent on government in a huge way - positive and negative. And to that extent, the community has a rightful stake in every salary. That's not an argument for over regulation of salaries. It is simply a statement of fact. Travel the world and look at the wealthiest and most functional societies as well as the poorest and most dysfunctional. The government's role and the functioning of the social contract is what distinguishes Australia from Afghanistan or Norway from Nigeria.

Telstra is a beneficiary and casualty of good and bad decisions made by government on all kinds of issues including such diverse policy areas as health, education, law enforcement and superannuation - not to mention good and bad regulation.

If it's one lesson we have learnt from the current financial crisis, it is that there is little correlation between salaries earned at the top and a real contribution to the economy - not to mention society. Many of those at the top of the wealth ladder are most culpable for the current crisis.

CEOs have been telling us for so long - especially in the finance sector - that if we don't pay these huge sums, we'll compromise our future. And look where that has gotten us.

The basic issue is that we're all a lot closer together in this process than your average CEO wants to pretend. The nurse working shifts at the local hospital, the garbage collector doing the morning rounds and the teacher doing hard yards in a tough school have been massively underappreciated during the past two or three decades while the CEOs have convinced us that the supposed genius resident in them is worth so so so much.

I didn't buy that before the crisis and the crisis has just proven the point.

Sol was right to back government controls on the earnings of companies in which the government has a big stake. Only problem is, he forgot to look in the mirror.

MALCOLM'S MOMENT

Malcolm Turnbull got his first real workout as leader of the Opposition last night. He didn't come out well.


It was good watching the unflappable Malcolm Turnbull in a flap last night on the 7.30 Report.

Kerry O'Brien once again proved his skill as journalist - interrogator. As he digs deeper into the whole banking guarantee question and the financial crisis, Turnbull is playing with fire.

At stake is confidence in our banking system and the success of our responses to it. Turnbull's strategy is to test the boundaries here for a political point that looks increasingly flimsy.

The big issue is the one raised by Ken Henry yesterday and concerns the extent to which Turnbull's reckless speculation about the previous $20,000 guarantee covering bank deposits in itself contributed to the need for a hasty but essential response. I for one was surprised and alarmed to discover two weeks ago that the integrity of our savings was being brought into question amidst all of the assurances about strength of our banks. Malcolm Turnbull began that discussion. Everybody knows that when it comes to the banks, perceptions of security are everything. In a time of international turmoil, the sensitivity is heightened.

It should be remembered that Turnbull spent months berating Wayne Swan over the impact of his declarations - proven correct - that the "inflation genie" was out of the bottle in the Australian economy. If there was a self fulfilling element to Swan's inflation references, it was dwarfed by the impact of Malcolm Turnbull's decision to raise questions about the $20,000 guarantee cap at a time of global banking turmoil.

Turnbull revealed his real concerns late in the interview when he said "What about this Kerry, what about someone who's taken their money out of a cash management trust, paid an exit fee, put their money into a bank because they wanted to get the benefit of the Government guarantee.

And they're now going to have to pay a tax to Wayne Swan for doing... for taking advantage of a guarantee Wayne Swan and Kevin Rudd told them on the 12th of October was free?"

As any changes being mooted by the government to the guarantee concern only those holding deposits in excess of one million dollars, Turnbull's comments reflect his real interest. He wasn't able to voice any pleasure at the fact that the bank deposits of the rest of the population were safe. Nor was he able to point the finger at his former investment banking colleagues who created the mess - those same guys who levied the sacred "exit fees" Malcolm refers to. Now he's concerned about his other mates moving their millions to guaranteed bank deposits and expecting it all to be free and easy - and taxpayer funded. Aren't those the attitudes that got us here in the first place?