WestPac-Woman: Outrageous Fortune

“What is the greatest threat to our way of life and democracy in the years ahead?… (T)he widening gap between the very rich and everybody else, now threatens the social consensus and political stability, not only in Britain but also in America and Europe… Anatole Kaletsky*

It’s three decades since the arcade and later online game Pac-Man* was let loose. The  gobbling goblins symbolized the 8os, the omnivorous decade of greed, though it was really only a warm up for the more  recent shambolic shenanigans of the global financial system in its fading sub-prime.

Now Westpac CEO Gail Kelly is poised to become the NZ$70 million WestPac-Woman if the bank’s shareholders okay another round of long-term share incentives for the Australian bank’s dragon lady, headhunted from St George’s Bank three years ago.*

Players navigate Pac-Man through a maze, munching pac-dots as they go. When all the dots are swallowed Pac-Man is promoted to the next stage, just like senior managers in the corporate world. Four enemies (Blinky, Pinky, Inky and Clyde in the American version) roam the maze, trying to snare Pac-Man. There is no Bonnie. At Westpac there doesn’t need to be. The heist is an inside job.

 If an enemy touches Pac-Man, a life is lost. When all lives have been lost, the game ends. Pac-Man is awarded a single bonus life at 10,000 points by default. A perfect Pac-Man game occurs when the player achieves the maximum possible score on the first 255 levels (by devouring every possible dot, power pellet, fruit, and enemy) without losing a single life, and then scoring as many points as possible in the last level. The maximum possible score is 3,333,360 points.

Kelly  is in line for her own perfect play in the next five years with a potentially obscene bevy of bonuses  denominated in millions of dollars. Based on Westpac’s recent closing share price of A$21.92, Kelly could be worth A$55 million if she –or rather the wider Westpac team- meets agreed and egregious performance targets.  

In Bingo parlance, this would make her No 1, Kelly’s eye, on her own, at least as far as the Big Four Australasian banks are concerned. Nice work if you can get it, but totally counterproductive in terms of staff morale and engagement and in the messages it sends to bank clients big and small.  She is both the banker and the main player in a game where the numbers are ridiculously exorbitant.

These inflated digits are just the  medium-term possibilities. Shareholders will also vote next month at the annual meeting on an increase in her potential short-term bonus to A$3.6 million. Westpac recently announced record cash earnings of A$5.88 billion for 2010.

Details of her pay were disclosed in Westpac’s annual report published last week and comes just a few weeks after her Kiwi counterpart at Commonwealth Bank, Sir Ralph Norris, chalked up A$16 million last year thanks largely to a big increase of nearly A$7 million in his long-term incentives.

In a recent piece in The Times, London* Anatole Kaletsky cites examples of critics from both the right and the left who have assailed the ever widening gap between executive pay and ordinary wages, especially in the unproductive financial sector, which squeeze out the middle class, and undermine democracies at a time when ordinary workers face cuts in their pay and pensions.

Kaletsky  quotes writer Will Hutton who suggests that extreme inequality, as well as being morally repugnant, imposes huge economic losses on society. Far from encouraging wealth creation and innovation, Hutton argues that it undermines entrepreneurship by offering enormous rewards for zero-sum games that simply shuffle existing assets. When finance is as absurdly lucrative as it is in modern America and Britain, enterprise and talent are inevitably diverted from the creation of genuine new wealth. 

That gross inequality causes stress and social problems, not just among the very poor, but at all levels of society is also what Richard Wilkinson and Kate Pickett emphasize in their new book, The Spirit Level Why Greater Equality Makes Societies Stronger.* The title could be adapted to refer to business organisations.

The current woes of crisis-stricken countries are not only due to spectatcular speculation disasters and the questionable diversion of public finances, but also to their inability to create wealth.   Now the financial tide has gone out former paragon Ireland is the latest country to stand exposed on the windswept rocks of near sovereign default.

The banking quadopoly over the Tasman don’t have an Aussie Bank to provide an alternative, though after the last controversial increase  in mortgage rates there are moves to ramp up the mutuals to provide some competition.

On this side of the ditch the sustainable creation of wealth through innovation is the country’s  big challenge.  A déjà vu bonus bonanza in the Australasian banking business points entirely in the wrong direction and widens both the credit and the credibility gaps between businesses and the financial service sector at a difficult  time of constraints and restraint.

Bring back Goldstein.

    #Lyall Lukey 21 November 2010
   http://lukeytraining.wordpress.com/ My other blog 
   http://www.lukey.co.nz/  http://www.smartnet.co.nz


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