It can’t be easy leading a media company in this tough environment, much less one with the size, complexity and history of Fairfax. But the burden must be made easier when executive pay packets show so little sign of depletion.

Fairfax’s staff are wearing their “Fair Go Fairfax” T-shirts today — a form of protected industrial action — after a stop-work meeting yesterday afternoon approved a resolution slamming the company for the 50% pay rise awarded to chief executive Greg Hywood, along with the healthy increases enjoyed by other executives. Meanwhile, the company is still sticking to its offer of no guaranteed pay rises for journalists in enterprise bargaining negotiations. The journalists’ union is trying to ensure pay at least goes up with inflation, but the company wants to make it all “merit-based”, which means up to the discretion of management.

Fairfax’s most senior executive froze their base pay in 2014 and diverted 10% of their pay into Fairfax shares. As the shares rose 76% in full-year 2014, that turned out to be a very savvy move, buoying their pay packets significantly. Add to this the fact Fairfax’s four key executives met most of their incentive pay targets (which revolve around cost reductions, set earnings goals and revenue targets), and it was a lucrative year to lead Fairfax.

Hywood had a total base salary (including superannuation and the like) of $1.617 million, and the shares and rights he was able to exercise over the year totalled $1.244 million. That took his total pay to $2.8 million — $1.1 million more than it was a year ago. CFO David Housego went from around $840,000 to $1.3 million. Gail Hambly, counsel and company secretary, went from $718,000 to $1.06 million, while publishing boss Allen Williams, who was earning $315,000 as CEO of Fairfax New Zealand, got a four-fold pay rise to $1.19 million.

Fairfax says base pay for its executives hasn’t increased, and for Hambly and Hywood, this is true. Housego and Williams did get hefty increases in their base pay, but both are new to their jobs.

The bulk of compensation increase came incentive payments. But Fairfax’s journalists scored some big goals too over the past year, and they aren’t being similarly rewarded based on their success.

Fairfax put its foot in it yesterday, courtesy of its crisis communications consultant Sue Cato (one of the nation’s best), when she accidentally forwarded her discussions on how to respond to a media requests on the pay issue to The Australian’s media reporters.

That forward revealed a remarkably tone-deaf comment from Hambly, while discussing how to respond to a Mumbrella journalists’ request for comment on the pay disparity.

“‘Of course the aggressive ­response is that the increases are all incentive-based — i.e. the management was prepared to back itself to achieve set targets — something the journalists are refusing to do,’ she reportedly said.

Hambly is correct, in a way. Journalists don’t want their base pay to stay the same while opening themselves up to ever greater “incentive” payments, but there’s good reasons for that. It’s a lot easier to measure the worth of an executive than someone lower down the chain, and inflation increases mean a lot more when you’re on base pay of $60,000 than on Hywood’s $1.6 million.

And $2.4 million to four executives at a time when dozens of journalists’ jobs are being cut was never going to go down well. For an insight into what people must be thinking, here’s what $2.4 million will get you in the media:

  • The Harvard Shorenstein Center in 2007 estimated that foreign bureau staffed by one journalist can cost around $300,000 a year in set-up costs, security and salaries. So $2.4 million will buy you eight of those. Let’s say seven if we counted inflation since 2007.
  • A senior journalist or photographer can earn around $80,000 a year. So $2.4 million can get you 30 of those. Or if you’re taking cheaper entry-level journalists, you could get a decent newsroom — 48.

At a time when Fairfax’s front-line staff are doing more with less, their jobs could be made a lot easier with some extra money. Instead, they’re seeing significant dough go to the top. And while incentive payments have long been argued to align executive incentives with shareholder returns, their sheer size in this case is questionable.

But there is one upside. Union reps Crikey spoke to this morning reckoned this would strengthen their hand come pay negotiations. Further discussions with management will take place next Tuesday.