Debate is swirling in the telecommunications industry this week about whether NBN Co executives are paid too much, with one newspaper and the Opposition criticising the company’s remuneration structure, but the company itself highlighting its achievements so far and the need to pay commercial salaries to attract the right talent.
Yesterday, the Herald-Sun newspaper published a story which appeared to use information from NBN Co’s 2010 annual report (published in October last year) and Corporate Plan (published in December last year) to demonstrate that the cost of its staff had reached an estimated $132 million per year, with at least 34 NBN Co staff on salaries between $300,000 and $400,000 a year. NBN Co is strongly hiring at the moment as it bulks up its workforce and the NBN rollout picks up speed.
In sustained attacks yesterday, Shadow Communications Minister Malcolm Turnbull opened fire at the company on the issue, describing its staff as “well-paid” and Communications Minister Stephen Conroy’s approach to spending on the network as “reckless”.
“This is a start-up business, but unlike every other start-up business, there are no financial constraints at all,” the newspaper quoted Turnbull as saying. “I have heard so many stories in the industry of people being lured from (other) employers with pay rises of 50 to 100 per cent.”
The annual report shows that for the 2010 financial year, NBN Co had four executives on salaries of $700,000 or above, and five more above $400,000. NBN Co chief executive Mike Quigley is personally paid more than $1.8 million a year, but donated his first year’s salary to aid research in brain disease and stroke rehabilitation. Quigley is believed to have significant resources owing from his past history as a senior executive at French networking giant Alcatel-Lucent.
Speaking to radio network 6PR in Perth yesterday, Turnbull said NBN Co had more employees than it had subscribers on its network, “and they’re very well paid employees”. It was “amazing” that NBN Co had around 1,000 employees but only about 560 subscribers on its network, the Liberal MP said.
“The bottom line,” added Turnbull, “is that this business belongs to a shareholder, Stephen Conroy; well it really belongs to the taxpayers but Conroy’s the Minister who is responsible for it and he is absolutely indifferent or reckless about expense.” Turnbull agreed with the 6PR host’s contention that “anyone in business knows that IT is a bottomless pit into which you can tip money if you want to”.
“Of course, absolutely,” he said.
“And that is always going to be the case when you have a shareholder, or a shareholders’ representative Conroy, who does not care about the expense. If they were fair dinkum, if they were treating this money as they should, as carefully as if it were their own, then they would have done their homework and ensured that they got a cost-effective solution.”
Turnbull himself is believed to be in possession of a substantial fortune, owing primarily to his investments in companies such as OzEmail and WebCentral, as well as his history as the managing director and a partner of investment bank Goldman Sachs Australia. The BRW Rich List, which tracks Australia’s wealthiest individuals, estimated the MP’s fortune at $178 million in 2009.
Speaking in response to the Herald-Sun’s report, NBN Co said it was a startup organisation that was “growing rapidly”. In a relatively brief time, the organisation pointed out, it had put in place most of the major components upon which the NBN would be based, including:
- Arrangements for its operating and business support systems
- A contract for the provision of the fixed wireless network and the interim satellite service (which begins next month)
- Major component supply contracts
- Design and construction undertaken in five First Release Sites, and the connection of the first mainland test services.
- A major construction agreement with Silcar on the terms of construction for 40 per cent of the construction task nationally over the next two years
NBN Co’s operating costs would exceed its revenues in the company’s initial years, the company acknowledged, but it forecasted positive operational earnings from the 2018 financial year, with positive net incoming to kick in in 2021. “Revenues in the Corporate Plan are projected at $5.8billion in FY2021 and $7.6 billion in FY2025,” the company said. The Government’s $27.5 billion equity investment will be repaid over the life of the project.
In terms of its executive remuneration structure, NBN Co pointed out that it was operating in “a competitive commercial market” for staff and needed to pay market rates to attract and retain experienced and highly-qualified people.
“Independent external advice was followed on remuneration levels, benchmarked against industry standards,” the company said. “The $132 million forecast in the Corporate Plan for staffing includes all staff-related costs — salary, training, travel, recruitment etc.”
The senior executives with upper salaries mentioned in the annual report, NBN Co said, were the first staff hired as they were the ones responsible for creating the company as a whole, developing its strategic decision and making critical decisions about its future. “The senior team were also responsible for the recruitment of their direct reports and for hiring staff to progressively deeper levels in the organisation,” the company said.
In comparison with executives at other major telcos, NBN Co executives appear to be paid more than some but less than others. iiNet’s 2010 annual report, for example, shows the company’s highest-paid executive, chief executive Michael Malone, picked up on $668,000 that year, with others such as chief technology officer Greg Bader on $424,000. Other executives were on salaries commonly between $200,000 and $400,000.
However, Telstra’s top executives were routinely paid more than $1 million each in total remuneration in the 2010 financial year, according to the company’s annual report; with the company’s chief executive David Thodey pulling in $3.2 million in total, and several others such as CFO John Stanhope above the $2 million mark.
Image credit: NBN Co
For me, it’s a matter of if you want to do something right, you have to find the right people. If you want to find the right people, you have to offer the right remuneration. The sort of people needed to do something this large and this complex are people who would get these salaries elsewhere, so if you want them you have to pay them.
As the old saying goes, if you pay peanuts, you get monkeys…
Personally, I think the NBN Co salaries have been a little too high. It’s a very prestigious job to get in on the ground level in a project like this, and I don’t believe that there is that much difference for the sort of person who would want that job between being paid $300,000 and $400,000. I think NBN Co could have saved a bit here … but I also think Turnbull and the Herald Sun are pushing that argument too far.
Of course they also have no job security past the next election.
If people are being offered 50 percent and above payrises is the problem really NBN Co paying too much or is it other telcos not paying enough or giving enough incentives to retain staff
Out of the other telcos, it would really only be Telstra and Optus which are paying full rate, I reckon. Perhaps Vodafone.
I dont understand why the coalition is so surprised, I mean according to them NBN is costing $55 billion right? or was it 100 billion? I cant remember they change it every week. So surely some of that money must be going to pay the wages…
I believe all executive management is over paid…
If you look at salary trends over the last 100 years or so, in the early days the likes of nurses were paid more than business managers… Interesting that those who helped others were formerly considered more worthy than those who look after them self, but not now? I guess those who looked after themselves… really, looked after themselves…!
However given the choice of Mike Quigley @ $1.8m or say, Sol at a base salary of $3m (plus easily reached incentives, which blew out to more than double that)…well!
Ooh, I now await with bated breath, the inevitable government vs. private sector $ spiel…from the usual suspects!
Honestly it doesn’t matter. There are far greater concerns than if the executive are being paid to much.
This is another attack vector that just screams opposition for opposition sake to me.
I hate that Turnbull and company almost actively ignore some other, more glaring flaws, with the NBN, in favour of attacking their choice of executive and now salaries.
What about the fact that the CVC charges are too high and their needs to be a direct sink of capital into the project to bring prices down?
What about the fact that edge markets like country towns and farmers may not get any better performance than they would under current generation technologies and maybe a subsidy to find innovative solutions would be far more effectual to this market?
What about the fact that the current NBN design may preclude it from being used as dark fibre backhaul for new mobile technologies and could the network be modified such as to provide this kind of service as an alternative to PIPE networks where PIPE is unwilling to lay SMOF, both increasing the costs of mobile services and depriving the NBN with a potential source of revenue?
What about the fact that it seems unclear as to how NBN Co intends to handle medium density dwellings and could body corporates instead take the responsibility of determining the internal roll outs in some cases due to the jurisdiction nightmare this will present?
What about the fact that the government also needs to provide incentives for technology company to host in Australia now that there is this big network that they can utilise as a testbed for high bandwidth services?
What about the wasted money on the, for most customers, non-essential backup battery?
And that is just off the top of my head. Notice that all of these problems can probably be solved without reinventing the wheel here.
While you oppose the policy in its entirety Mr Turnbull it is impossible for you to take any effective action to shape the policy into something more workable.
You don’t climb a mountain by attacking the sheer cliffs, you find the easiest way up. Stop making your goal about the NBN and make it about providing Broadband.
It’s great that you are considering alternative technologies like FTTN, but please stop setting yourself up for the next election and actually focus on fighting the issues here and now.
It’ll be much more rewarding when you get a useful ammendment into policy than sitting there complaining about salaries and watching your argument go completely ignored.
+1
I suspect the reason that the Opposition is not tackling these issues is that they’re not ‘sexy’ or easily converted into soundbites.
Another thing to consider is that those are practical issues with real solutions – if the coalition applies any real pressure on those issues Labor can fix the problems, and the NBN will be stronger for it. No, better to stick to making vague, broad complaints that can’t really be addressed.
I think the biggest problem is the CVC charge. More specifically, why is there a CVC charge at all? No wholesale network that I know of in the rest of the world has a “contention” charge. And this is an FTTH network. How could there possibly be congestion? All subscriber plans should be completely unlimited from the start to encourage takeup and the use of new and innovative applications.
And why is the CVC price so god awful high? $20/mbps? In a year or two that will be equal to international transit rates, even though the NBN is basically a giant LAN where intranational transit should be nearly free.
Well if the opposition were actually doing their job these issues would actually be on the table. The only person I have seen give a rats arse about CVC is Simon Hackett, and we all know how well that went.
A most interesting form of fallacious strawman argument with extreme cherry picking.
Further, it is also a well known fact in regard senior management off payroll bonuses for tax evasion purposes in the form of bonus package expenses from the company credit cards, a large auxiliary separate general entertainment expense account, relocation fees, low cost home/car loans, education expenses, along with bonus share packages. Also included within these senior management packages is all expenses covered within and out of state/international business/first class travel as well.
Thus, this comparison based only on simple primary wages paid, creates large uncertainty and error bars, and provides insufficient data for a full meaningful comparison in the real world. In the world of denial cherry picking of data, this eliminates the inconvenient truth of higher secondary income streams for these same executives from the same company, which has a very large impact on these executives actual real annual income, in the real world.
At this point in time a cynic would say, “insufficient data has been provided for a fair assessment at this point in time”.
Who benefits, from some wanker with a hidden unstated agenda, who is only telling the general public at large, far less than 25% of the real facts from the real world?
Who benefits, from some wanker with a hidden unstated agenda, who is only telling the general public at large, far less than 25% of the real facts from the real world?
Conroy
..sorry, couldn’t resist.
Damn hypertext brackets, image the word “cough” on each side of Conroy :-(
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