KEY POINTS:
Will Prime Minister John Key surprise us on return from his Hawaiian holiday by scuttling the forthcoming Cabinet ministers' pay hike and bringing in new rules to link their salaries to the country's economic performance?
The notion that politicians - as much as business leaders - should exercise
restraint at a time when they are urging prudence for others is long overdue.
It is unfathomable that our Cabinet ministers should accept a pay increase during these straitened times when unemployment is set to soar.
And unless the Key Government gets on top of the very tricky upcoming Budget issues the official debt will snowball, leaving taxpayers to meet the bills.
It is unfathomable also that the new Cabinet is basically off on holiday until mid-month, with just one duty minister on call, given the pressing nature of the problems facing the country.
In the past, Key has ducked the salary issue by saying he will donate his own pay increase to charity.
This is exactly the ruse used by one of his political heroes, Singapore's Lee Hsien Loong, who faced down public fury in 2007 by saying he would "donate" a planned pay increase "to suitable good causes" for five years.
Both Prime Ministers are substantially wealthy men in their own right, so it is basically a cost-free gesture.
But Singapore's Lee has since seen the light and aligned the salaries of senior politicians and administrators with market conditions.
The upshot is that with Singapore in recession and facing further economic contraction, Lee, his Cabinet ministers and senior administrators will take pay cuts of around 19 per cent next year.
It also makes sense to use the impact of the forthcoming pay cuts on his ministers' wallets to give them the incentive to get the Singaporean economy into better shape.
Key, as a disciple of market ethos, should get this.
Lee is not the only regional political leader to adopt such measures.
This year Australian Prime Minister Kevin Rudd's Government cancelled a recommendation that MPs should get a 4.3 per cent pay rise. Rudd said then that parliamentarians should show wage restraint as an example to a community that was being asked to tailor its expectations so that inflation did not get out of hand.
The Independent Remuneration Tribunal has since recommended a hefty increase, saying that Cabinet ministers' salaries have fallen substantially behind those of senior public sector heads.
In Ireland - which has also faced tough economic times after many years of stellar growth - Finance Minister Brian Lenihan announced a temporary "voluntary" 10 per cent pay cut for Government ministers as part of cutbacks in his October Budget.
Senior players quickly got the message and others including Irish President Mary McAleese, the central bank governor, the auditor-general, and heads of Government departments followed suit.
This is the type of leadership that enlightened heads of affected industries including media, aviation, computing, transport, finance and motor vehicle manufacturing are finally showing as they too take pay cuts and forgo bonuses.
Many are trying to get their companies into better shape instead of continuing with the outdated and ruthless practice of simply notching up "successful head count reductions" of employees and winning bonuses accordingly.
A Wall Street Journal review has found nearly 10 per cent of new chief executive contracts have pay cut provisions and that the trend is growing.
Boards are also getting much more aggressive on severance payout terms for CEOs rather than allowing quite incompetent company heads to be paid exorbitant amounts to simply walk away.
Air NZ chief executive Rob Fyfe kicked the trend off here this year by announcing his senior executive team's pay would be linked to the company's financial health.
"It was only fair as business performance went down so did pay," Fyfe said. His own own pay fell 20 per cent in the year to June.
Other salaried staff will now get pay increases only if they achieve productivity gains.
Unfortunately, not too many other New Zealand companies are following this example. Nor are they showing leadership and flexibility by examining whether they need to adapt the business model to meet the times, rather than simply reaching for the firing button.
The real issue that bugs many vulnerable workers is that they feel they will be asked to shoulder the burden for the bosses' mistakes.
US entrepreneur Barry Diller, discussing whether companies should "hoard" workers during these tough times rather than lay them off to meet financial reporting expectations that may be quite unrealistic, makes a good point. Diller, chairman of Expedia and CEO of InterActiveCorp, is particularly upset that even companies that are profitable are slashing staff.
"The idea of a company that's earning money, not losing money, that's not, let's say 'industrially endangered', to have just cutbacks so they can earn another $12 million or $20 million or $40 million in a year where no one's counting is really a horrible act when you think about it on every level," says Diller.
"First of all, it's certainly not necessary. It's doing it at the worst time. It's throwing people out to a larger, what is inevitably a larger unemployment heap for frankly no good reason."
Diller goes on to say: "It's not that you don't want to earn as much money as you can - it is your obligation, of course - but companies have obligations beyond that and they certainly have obligations beyond that at certain times, in the times in which they operate.
"And they also certainly ought to know that meeting and beating expectations is probably yesterday's game and it will be increasingly so, which would be, by the way, very healthy for companies.
"Running a company that meets and beats expectations, and that runs their company accordingly, are companies that I would question why anyone would invest in."
For a CEO who has been criticised as one of the most rapacious in US business, this is a marked turnaround.
But "meeting and beating" expectations was the foundation on which much of the financial bubble was built.
If Diller gets the changed ethos, why shouldn't Key?
