Greedy hypocrisy of Telecom bosses

At the same time Telecom are attempting to force their staff employed as lines engineers to become dependent contractors, a move that will more than halve their income, the company continue to defend paying multi million dollar salaries to their top executives.

To make matters worse, Telecom CEO Paul Reynolds recieved his full performance bonus despite Telecom recently announcing a 43% drop in profits. The EMPU estimate his total remuneration package for the year is $7 million. Six other top executives receive a total of $11 million to share amongst themselves.

This problem is not new, and despite the excuses has nothing to do with the recession. A 2007 survey by Sheffield of 501 chief executives* found the proportion of bosses not reaching targets rose from 28 per cent in 2006 to 43 per cent in 2007. Those who missed targets were still paid three quarters of their targeted performance pay. Its highly unlikely these same bosses were so understanding when it came to paying their own workers based on performance.

Telecom chairman Wayne Boyd said Reynolds got the maximum bonus for his outstanding first full year in which he had negotiated the company's obligations with the government. It says a lot that Telecom believe Paul Reynolds deserves $7 million for his work attempting to influence the Government. It says a lot because this demonstrates how skewed the priorities of the company have been ever since it was privatised - protect the monopoly, or something as close to the monopoly is the goal - not providing decent telecommunications services.

As John Minto says, Telecom have been a boil on the country's backside for almost 20 years since it was privatised by Labour and National. Minto also notes the company employs over 90 lawyers and suggests this monster legal team is there to protect Telecom's near monopoly.

Telecom's relations with government have sometimes resembled Elizabethan style patronage, where monopolies were given out to loyal courtiers, who undertook a little price fixing to ensure they were enriched at public expense. This is an close description of the privatisation of the company, yet most people have no problems describing Elizabethan examples as political corruption. Telecom would have loved the 16th century - even if there were no phones.

Quite by accident, I did a google search in New Zealand with the words outstanding and CEO. Funninly enough its a rather boring platitute hosted on a lot of CEOs. Its just false flattery, in the mode of 'Oh, your majesty' (note capitalisation is a political issue).

Just this week, a telecommunications watchdog, the Independent Oversight Group found that Telecom had breached its operational seperation undertakings by offering wholesale discount deals to its customers. The IOG called these breaches 'non-trivial', which is another way of saying these breaches were serious. So Telecom is up to its old tricks, fighting and suppressing competition whenever it has the chance to occur. Why am I thinking about the prospects of a 'dissolution of the monasteries' right now? If that's going a bit far, at least make operational separation a genuine separation and break the company up.

It is also up to its old tricks in its relations with its employees. Even National MPs are recommending the engineers refuse to sign the nonsense contracts offered by Telecom

Telecom are not offering their engineers a genuine 'business opportunity' as they are setting all the terms of the contract. Work will only be offered on Telecom's terms - these workers will be nothing like real independent contractors, and will lose the overtime payments they receive now. Telecom are offering no redundancy, yet the engineers are being given the 'opportunity' to front up with $60,000 for their own vans and equipment. The income of the lines engineers will drop by up to 66%, which of course is the reason why Telecom is attempting to pull this stunt. Please support the engineers and their families - in this situation they have little option but to go on strike.

Instead of gifting their new CEO all sorts of travel allowances when Paul Reynolds shifted from the UK, why didn't Telecom ask him to bring his own plane?

* Source: Dominion Post (6/3/2008), "Bosses collect despite targets"

Income inequality and the dominance of corporations

In the latest edition of Focus on the Corporation, Russell Mokhiber and Robert Weissman collate some interesting facts demonstrating the inequality of the world, and how the gap between the rich and the poor is widening.

While they title their piece 'Economic Apartheid in America', many of the examples have a familar ring, perhaps demonstrating how US hegemony over the world economy has led to inequity becoming a significant (and unwelcome) export.

"Of the world's 100 largest economies, 47 are nations, and 53 are corporations. Seventy-five percent of major corporations hire a consultant to stop employees from forming a union."

"Top executives now make more in a day than the average worker makes in a year."
(I assume this is based on US figures)

The Washington monument is 555 feet tall. Imagine it signifies the 2003 average compensation for CEOs in the Fortune 500.
- Today the salary of the average worker would be only 16 inches tall
(a ratio of 419 to one)
- In 1965 the worker's monument was 13 feet six inches tall
(a ratio of 41 to one)

And in order to preempt the predictable defence that the wealthy deserve higher incomes because they 'work harder', Mokhiber and Weissman point out that forty-two percent of those listed on the Forbes 400 in the US, inherited sufficient wealth to make this list.

"J. Paul Getty Jr. inherited the oil fortune from his father. David Rockerfeller Sr ($2.5 billion) is the grandson of Standard Oil founder John D. Rockefeller....."

They also include a nice quote from the Constitution of the Knights of Labour. Dating from 1869, it is a nice way to demonstrate the similarities between the so called modern 'global' economy and that of the 19th century.
"The alarming development and aggressiveness of great capitalists and corporations, unless checked, will inevitably lead to the pauperization and hopeless degradation of the toiling masses. It is imperative, if we desire to enjoy the full blessings of life, that a check be placed upon unjust accumulations and the power for evil of aggravated wealth."
---
When modern so called free marketers like to associate their ideas with Adam Smith, the man who coined the term the 'invisible hand', it is worth noting that they often use Smith in a selective fashion. While Smith did not like governments (the bit right wingers love), he also hated what we now call corporations. Smith would have argued for the need to resist mergers and acquisitions and break up monopolistic firms like Microsoft or Telecom. Yet the call for stronger competition law is now more likely to come from the left, rather than the right.

Why should public sector CEOs get 15% pay increases, when their staff struggle to keep up with inflation?

In a report released this week, State Services Commissioner Mark Prebble complains that state sector chief executives continue to be underpaid. Despite recently gaining significant percentage increases, those poor public sector CEOs are lucky to take home a $400,000 salary. Does that mean foodbanks now catering for those in a tailored suit and tie?

It is sad that Prebble does not appear to have sympathy for the public sector workers below the level of CEOs, some of whom went on strike last week, in the hope of obtaining far less extravagant pay claims from their public service bosses.

Kevin List of Scoop takes up this issue in the latest 'A Week of It'. I was pleased to see Kevin pick up on a National Union of Public Employees press release from Wednesday last week, featuring a friend of mine, Lynda Boyd. She was commenting in support of Child Youth and Family workers, forced to go on strike after receiving an abysmal wage offer that did not even allow clerical and administrative staff the chance to keep up with inflation.

"At a time when the State Services Commission is talking about pay hikes for public service Chief Executives it is ironic that workers dealing with some of the most vulnerable and challenging people in our society have to take strike action to try and get a decent pay rise. ItÂ’s wrong when frontline workers earning between $10.60 and $12.60 are being offered rises of 3% at a time when public sector CEOs are getting salary increases of 15%,"” said Lynda Boyd of the National Union of Public Employees.

Well said Lynda :)

Telecom win the Roger Award for 2004

Just got back from the Roger 'awards' ceremony, where Telecom was proclaimed to be the worst transnational corporation operating in Aotearoa in 2004. Contact Energy was the runner-up.

Last year Telecom turned their effective monopoly of most of the NZ telecommunications market into another massive profit. The dominance of Telecom over the New Zealand sharemarket makes the Government too nervous to dismantle their monopoly, even shying away from small steps such as local loop unbundling.

New Zealand continues to suffer ongoing negative effects from the sale of this strategic asset. To give one example Telecom have used their monopoly over the local loop, to prevent other operators from offering more attractive broadband options over the New Zealand network.

From 1995 to 2004 Telecom paid out more than its net earnings in dividends, meaning that the company is effectively being cash stripped by its wealthy foreign and local owners (reported earnings of NZ$6,464 million and dividends paid out of NZ$6,698 million). CEO Teresa Gattung takes home a salary of $2.82 million, earning more in a single week ($53,270) than the average New Zealander earns in an entire year.

In a financial analysis accompanying the Judges Report on the Roger, accountancy lecturer Sue Newberry makes two worrying observations about Telecom. As Telecom also operates in the US, it also must file financial reports according to the US accounting standards, standards that have been tightened since the Enron scandal. Telecom's total reported profits for the last four years are less than half of those reported in New Zealand. Since 2001 Telecom have incurred losses of $604m in Southern Cross Cables Limited (a subsidiary registered in a Bermuda tax haven), losses they did not have to declare in their NZ results. Also the pattern of shareholding in Telecom is changing, with foreign investors selling down their shares while NZers and Aussies buy them up. While this may improve NZ current account deficit, this and the fact Telecom continues to pay more out in dividends than it makes in profits suggests Telecom is financially unsustainable and should not be touched with a bargepole.

Still, if Telecom does crash like Air New Zealand, it may provide the Government with an opportunity to renationalise Telecom at a comparatively low cost :)