The fairness of RBA Governor Glenn Stevens's pay, which some have sadly sought to politicise. That is, he is absolutely entitled to his below-market remuneration (there is clearly a case for increasing it further), and we should thank our chosen deity for the fact that a man of such intelligence and integrity is managing the monetary policy show. According to Bloomberg: (HT: Ricardian Ambivalence):
"Barnaby Joyce, Senate leader for the junior opposition coalition partner The Nationals, which mainly represents rural areas, defended Stevens’s salary. While such income “would seem incredible to many Australians, the reality is that it’s probably not compared to what he could get somewhere else — at commercial banks.”"
I assume that Barnaby's advisors have made him aware of my independent analysis of the equity (or otherwise) of the RBA Govenor's pay. This is what I wrote the other day:
"Contrary to some absurd suggestions, Glenn Stevens deserves every cent of his well-below-market pay packet. A few commentators have made farcical comparisons to back their view that Stevens is paid too much. Let me objectively lay that debate to rest.
Glenn Stevens runs Australia's central bank, which is our single most important financial institution. It is the backstop for the entire banking system, and exerts a decisive influence over the path of Australia's $1.4 trillion economy. Stevens gets paid about $1m per annum.
In its 2010 Annual Report, the CBA discloses that its top 12 executives are all paid, on average, $5.4m per annum. Assuming that broadly similar pay benchmarks are used across the other three major banks, that tells us that there are at least 48 bank executives, setting aside all their smaller bank peers, who receive, on average, over five times as much total annual compensation as Glenn Stevens. (If we ignore Ralph Norris's 2010 remuneration of $16.1 million, the average/median pay for the 11 other CBA executives is still $4.4m/$4.2m per annum.)
A conservative assumption is that Stevens could get at least a second-tier job at one of the major banks. The precedents set by David Morgan (Westpac), Andrew Mohl (AMP) and John Fraser (UBS) imply he could actually run one. This, therefore, is his opportunity cost. Even supposing he could only pick up a subordinate position, Stevens is, in fact, very poorly paid if one accepts the principle of market-competitive benchmarks."
