Taking money that belongs to others: the criminality of excessive executive compensation

image copyright of Bruce Petty


In mainstream Australia there continues to be galvanized anger about the exorbitant salary packages corporate executives are paying themselves, in defiance of public opinion, economic realities and the public interest.

As public outrage grows and more shareholders revolt about excessive executive salary packages its time to break through the web of illusions and justifications about excessive executive compensation presented by corporate Australia, political leaders, the corporate media and given credence by bodies such as the Productivity Commission.

In a recent paper titled "Exorbitant CEO compensation: Just reward or grand theft" in the Journal Crime, Law and Social Change criminologist David Friedrichs argues that executive compensation packages should be considered as a form of white collar crime. For Friederichs it is time to criminalize this behaviour. He calls it a form of robbery.

Friederichs is Professor and Distinguished University Fellow, Sociology/Criminal Justice, The University of Scranton and a lifelong researcher on corporate and white collar crime.

He argues that the corporate culture and practices that provide for and justify excessive executive compensation for corporate executives not only creates what he calls "crimogenic conditions" but are likely to lead to the taking of money that belongs to others.

Friederichs writes:

""Walking into a bank with a gun and demanding money from a teller is one way to steal money... Walking into a corporate boardroom and securing from the board's compensation committee, made up of cronies, paid consultants, and even relatives, compensation of millions sometimes tens of millions or hundreds of millions is another way to steal money. The principal differences are that the second way of stealing money pays much better, is all too often legal, and does not result in criminal prosecution and imprisonment. This needs to change"

The practices of excessive compensation have come to be viewed as standard business practice rather than as part of a spectrum of corporate criminal behaviour that goes unrecognized and unpunished. That is how corporate power works. It redefines reality to serve corporate and private interests. Its time to challenge that.