Medibank Private executives could gain million-dollar pay rise in proposed health insurer sell-off: expert

Extract from ABC News

By the National Reporting Team's Lorna Knowles

Updated 1 hour 12 minutes ago

Senior executives at Medibank Private are set to be the big winners if the insurance company is sold off, an expert says.

The Federal Government has announced the health insurer will be sold through an initial public offering in the next financial year, 2014-15.
The company's top earners could join the multi-millionaires club after the planned share float, but the union representing Medibank workers fears such salary hikes will lead to big job losses.
Medibank Private managing director George Savvides and a handful of other top executives could reasonably expect to triple their already generous salary packages after the sale.
Corporate governance analyst Martin Lawrence says history has shown that when publicly owned companies go private, executive pay packets skyrocket.
"There's a reason why executives are really big fans of privatisation," Mr Lawrence said.


"You get usually somewhere in the order of a two to four-times increase depending on what you were paid beforehand and how lucky you are in the process."
According to the latest Medibank Private annual report, Mr Savvides is paid $1.2 million.
Mr Lawrence says that after the sale his total salary package could balloon to $5 million.
Medibank group executives Dr Andrew Wilson and Dr Matthew Cullen are now paid $1.85 million. Mr Lawrence expects their salaries could increase to $3.2 million.
"The way that CEOs and senior executives of big listed companies get paid is based on what other CEOs and senior executives of listed companies get paid, of a similar size or a similar type," Mr Lawrence said.

A recent, stark example of an executive salary increase after a public company sell off is QR National.
The rail company was sold in 2010 and the salary of chief executive Lance Hockridge increased from $1 million to $6 million.
CPSU national secretary Nadine Flood says any executive salary increases at Medibank could lead to job cuts.
"What we could see is more jobs going to pay fat executive salaries and to provide a return to the new owners."
Medibank Private declined the ABC's request for an interview.
Finance Minister Mathias Cormann says the Government will prepare for an initial public offering of Medibank Private subject to market conditions.
The Commonwealth is set to reap an estimated $4 billion from the sale.