Aus­tralia's ex­ec­u­tive pay back­lash hits Tel­stra and Transur­ban

The Guardian Australia - - News - Michael McGowan

Some of Aus­tralia’s largest com­pa­nies are fac­ing a con­certed push­back from share­hold­ers con­cerned about ex­ec­u­tive pay.

Amid on­go­ing con­cern about stag­nant wage growth, the be­gin­ning of AGM sea­son and fresh ex­ec­u­tive pay dis­clo­sures have al­ready prompted a re­newed fo­cus on what the top end of town is earn­ing, with fo­cus on Tel­stra and Transur­ban.

On Thurs­day, Tel­stra was forced to apol­o­gise to share­hold­ers for a lack of clar­ity about how it cal­cu­lates ex­ec­u­tive bonuses and ac­knowl­edged some in­vestors still feel they are too high de­spite a 30% cut.

With share­hold­ers set to vote on the re­mu­ner­a­tion plan at next week’s an­nual gen­eral meet­ing, chair­man John Mullen has writ­ten to share­hold­ers de­fend­ing multi-mil­lion-dol­lar pack­ages as es­sen­tial in at­tract­ing ta­lented man­agers, while ac­knowl­edg­ing Tel­stra had erred.

The telecom­mu­ni­ca­tions gi­ant had cut bonuses fol­low­ing a year in which full-year div­i­dends fell al­most 30% and profit dropped 8.4%.

“Some share­hold­ers still feel that our re­mu­ner­a­tion out­comes were ei­ther not suf­fi­ciently trans­par­ent or re­sulted in higher pay­outs than share­hold­ers felt were rea­son­able,” Mullen said in a let­ter pub­lished on the ASX on Thurs­day.

At the same time, proxy share­hold­ers have raised con­cerns about the “over­sized” pay of toll road com­pany Transur­ban’s chief ex­ec­u­tive, Scott Charl­ton, ahead of the com­pany’s AGM on Thurs­day.

The Aus­tralian Fi­nan­cial Re­view re­ported that proxy groups ISS and CGI Glass Lewis, along with the Aus­tralian Share­hold­ers As­so­ci­a­tion, had taken is­sue with Charl­ton’s $7m an­nual pay packet.

The toll road op­er­a­tor con­trols 15 out of the 19 toll road con­ces­sions in Aus­tralia, in­clud­ing six in south-east Queens­land and seven in New South Wales.

Its as­sets in­clude Syd­ney’s North-Con­nex, Mel­bourne’s West Gate tun­nel, and the Citylink Tul­la­ma­rine widen­ing in Mel­bourne.

In Au­gust it was given the green light to pay $9.2bn for a con­trol­ling share in Syd­ney’s WestCon­nex de­spite the Aus­tralian Com­pe­ti­tion and Con­sumer Com­mis­sion ear­lier rais­ing com­pe­ti­tion con­cerns.

It means that on mo­tor­ways across Aus­tralia the sound of your e-tag beep­ing means a few more cents for the Transur­ban boss.

Charl­ton’s fixed salary re­mained flat in the fi­nan­cial year, at $2.2m, but he re­ceived a $1.5m cash bonus and se­cu­ri­ties worth $1.2m as part of his short­term in­cen­tive plan. He also re­ceived $2m in long-term eq­uity awards, the AFR re­ported.

His to­tal pay packet is more than triple the pay of other top ex­ec­u­tives at the com­pany, and both groups have raised con­cerns about the trans­parency of the firm’s bonus regime.

The groups would not vote to op­pose Charl­ton’s pay at to­day’s AGM, but had taken is­sue with the in­creas­ing gap be­tween the CEO and the rest of Transur­ban’s ex­ec­u­tive team.

In a pa­per in the lead-up to the AGM, ISS wrote that de­spite the com­pany’s pos­i­tive fi­nan­cial per­for­mance – Transur­ban’s an­nual net profit more than dou­bled in 2017-18 to $468m – the CEO’s pay was “ex­ces­sive and sig­nif­i­cantly in­creas­ing”.

A per­ceived lack of trans­parency around the com­pany’s bonus dis­clo­sure was “a ma­te­rial share­holder con­cern for trans­parency”.

Com­pa­nies such as ISS and CGI use proxy votes from other share­hold­ers in or­der to push for cor­po­rate gov­er­nance re­forms. The ASA is a not-for­profit in­di­vid­ual in­vestor as­so­ci­a­tion that ad­vo­cates for share­holder rights.

CGI said the dif­fer­ence be­tween the CEO’s pay and that of other ex­ec­u­tives was an is­sue of cor­po­rate gov­er­nance.

“Since over­sized CEO pay is usu­ally the size of an all-pow­er­ful CEO, in­ter­nal pay eq­uity can also serve as a check on a CEO’s author­ity, in­creas­ing the in­volve­ment of other ex­ec­u­tives in the man­age­ment of the com­pany and pre­par­ing them for fu­ture tran­si­tion into the role of the CEO,” CGI said.

“Ac­cord­ingly, a high level of ex­ec­u­tive pay in­equity, as in this case, may in­di­cate long-term prob­lems with the com­pany’s re­mu­ner­a­tion prac­tices and, more broadly, its board-level man­age­ment and over­sight.”

In a state­ment the com­pany said its re­mu­ner­a­tion poli­cies were re­viewed an­nu­ally, and it con­sid­ered “se­cu­rity holder and other stake­holder feed­back, mar­ket ex­pec­ta­tions and reg­u­la­tory de­vel­op­ments”.

“As ac­knowl­edged by ma­jor proxy ad­vi­sors in the lead-up to this year’s AGM, Transur­ban’s re­mu­ner­a­tion prac­tices closely align ex­ec­u­tive pay to the in­ter­ests of our se­cu­rity hold­ers,” a spokesper­son said.

CEO pay has come un­der in­creased scru­tiny as wages for most work­ers go through a pe­riod of sus­tained stag­na­tion.

In July a sur­vey by the Aus­tralian Coun­cil of Su­per­an­nu­a­tion In­vestors found me­dian pay for the CEOs of ASX 100 com­pa­nies rose to $4.36m in the 2017 fi­nan­cial year.

In Au­gust the scan­dal-plagued wealth man­age­ment com­pany AMP faced a back­lash af­ter hand­ing its new chief ex­ec­u­tive an highly in­cen­tivised re­mu­ner­a­tion pack­age that could earn him $8.3m in his first year in the job.

The deal meant Francesco De Fer­rari could earn a fur­ther $17.7m in cash, shares and op­tions over the next few years if he meets cer­tain per­for­mance hur­dles, in­clud­ing turn­ing around the com­pany’s lan­guish­ing share price fol­low­ing the scan­dals that have emerged from the bank­ing royal com­mis­sion.

Pho­to­graph: Joe Cas­tro/AAP

Proxy share­hold­ers have con­cerns about the ‘over­sized’ pay of Transur­ban chief Scott Charl­ton.

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