03 September 2009

CDF Remuneration

In an article in the Australian Financial Review on 2 September 2009 (Hurley mooted for top Defence job) John Kerin speculates on who might be appointed as the next Chief of the Defence Force (CDF) when Air Chief Marshall Angus Houston comes to the end of his term in early 2011.

In comparing the duties and remuneration of the CDF, Kerin has this to say:

The defence organisation has 93,000 full and part-time employees, which puts it up there with a retailer like Woolworths. It boasts $60 billion worth of assets, dwarfing the holdings of Telstra, and its stewardship of 3.5 million hectares of weapons ranges, training areas, bases and headquarters, bases and headquarters rivals some of the country’s bigger pastoral holdings. But that is where the similarities with any conventional operation end.

A base salary of $313,000 plus allowances paid to the Chief of the Defence Force (CDF) pales in comparison with the multi-million-dollar salaries paid to private sector chief executives.

Though the CDF has a 73,000-strong workforce under direct command, responsibility for the overall organisation is shared with the civilian head of the defence department in an arrangement known as a diarchy.

And then there are the dangers. Most chief executives don’t have to deal with the worry of young employees putting their lives on the line in war zones and steeling themselves for the inevitable casualties.

Kerin might have distinguished the CDF from private sector chief executives in another way. The CDF remuneration is not “get out of bed” money. Notwithstanding (or perhaps because of) his comparatively modest salary, the CDF does not expect to be paid an additional financial incentive to actually do the job he is being paid to do. And having worked hand-in-glove with two CDFs, I know just how intense and unremitting their jobs are. Sitting at the apex of the military command chain at a time of high operational tempo, these people have the genuine 24/7 jobs. The Australian Defence Force never sleeps, and that means the CDF is always on duty.

So it will always amaze me that people on multi-million dollar remuneration can have the gall to say to their Boards, “Please sirs/mesdames, thanks for my salary, but in order to get me to put in a 100% effort, you need in addition to dangle a multi-million incentive package in front of me”. I always want to know what these people are proposing to do for the incentive package that they would not feel obliged to do on the basis of their handsome base pay. Conversely, why would one offer a multi-million dollar package to anyone who would not give their all in return?

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