The fact that we have overpaid executives is not due to too much capitalism, but to too little. Capitalism has become a term too easily abused by anyone looking for a quick fix or an excuse.

There was a time when businesses were managed by their owners. There was a time when Edgars, for example, was managed and controlled by Sydney Press, who never paid anyone, including himself, an outrageous salary. Alas, we now have no Edgars at all after its demise at the hands of a fund.

Nowadays shareholdings are often spread among funds, nominees and distant individuals, with nary an involved owner in sight. These shareholders, financially astute as they may be, have no capacity to manage. They must rely on hired executives who have, or purport to have, the necessary skills.

When faced with remuneration demands from executives who have no stake, boards have little alternative but to pay. When the market reflects high remuneration levels as routine, what other alternative is available to a board, which itself is more concerned with the avoidance of risk?

The dilution of shareholdings is both a function of greater capital requirements and the outcome of social policies to democratise ownership. But the dislocation of money and its ownership is bound to lead to abuse.

Of course, we have in this country the problem of redress for a large part of the population. We will find that no solution is possible if we deny the fundamental truth, which is that it is jobs that we need.

The job of government is to enable and referee. The job of capitalists is to invest, to create jobs. With jobs will come customers and with customers will come more jobs. And more tax revenue.   

We need to restore the link between risk and reward.

Barry Hay
Parktown North

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