Should the Qantas board cut Alan Joyce’s pay deal down to size?

The optics of this week’s revelation that Qantas is leaning its shoulder into an effort to potentially claw back up to $16 million from former chief executive Alan Joyce are public relations gold.

Qantas has confirmed it has enlisted the influential “grey man” of governance to advise on whether to strip all or a portion of $16 million from Joyce’s performance-based pay entitlement.

Such an outcome could surely see blowback from Joyce – the pugnacious leader who left the airline amid claims of poor customer service and fractured industrial relations.

Alan Joyce left the company shortly after being hauled before a Senate inquiry last year.Credit: Eamon Gallagher

The board always had some discretion to curb some of Joyce’s short and long-term incentives. It is just that this option was mooted last year by the outgoing chairman, Richard Goyder – a man whose admiration for Joyce (through thick and thin) is best illustrated by his description of him as “Australia’s best chief executive”.

Former Boston Consulting Group adviser Colin Carter will review if Joyce’s pay packet is warranted.Credit: Tash Sorensen

But there is now a new sheriff at Mascot.

John Mullen, the former Telstra chairman, has been brought in by Qantas as the cleanup candidate, one who is unburdened by the operational or emotional legacy of Goyder.

While he remains chairman-elect for another few months, he will hold the key to all important decisions.

The airline’s board has enlisted the services of former Boston Consulting Group adviser Colin Carter, who isn’t a household name, but in advice on governance, none comes more respected.

AFL fans will know him for his recommendation in favour of having a Tasmanian team join the competition.

Meanwhile, those in the banking industry remember his work as part of the three-person independent task force brought in to advise Westpac on board failings following Anti-Money Laundering and Counterterrorism Financing Act compliance issues, which cost the bank $1.3 billion.

Joyce stood to take home $23 million in his last year, which included a mix of salary plus long- and short-term bonuses. He was also up for as much as $6 million in long-term trailing bonuses, which were dependent on Qantas’ future performance.

Since Joyce left last year, two of Qantas’ biggest headaches have come to a head. It has agreed to pay out $120 million to settle a legal claim brought by the Australian Competition and Consumer Commission, which involved booking customers on flights that had already been cancelled.

Meanwhile, the Transport Workers Union has won its case against Qantas for illegally sacking almost 1700 ground staff – compensation for which is now in the hands of the court.

Enlisting Carter to advise on recovering some of Joyce’s generous bonus payments provides the board with a level of protection similar to a public relations insurance policy.

If Qantas’ board uses its discretion to pay Joyce his maximum bonus, it can say the decision was taken after Carter’s advice was considered. If it chooses to cut the bonus, the same applies.

It is a tricky situation given shareholders previously voted in favour of Joyce’s pay, which was contingent on financial outcomes that may have been met.

To date, Joyce has been docked only $500,000 after he received a score of zero for customer satisfaction, one of the measures in his remuneration package.

Goyder acknowledged in Qantas’ 2023 annual report that “the company is experiencing an acute loss of trust from the community, and accumulated disappointment from customers, which the board and management are determined to fix”.

Since then, Goyder has announced his early exit from the chair, and a couple of directors have also announced their departure.

While Qantas’ board might have a fight on its hands with Joyce, its decision to recruit a governance expert shows a willingness to consider giving Joyce’s pay a haircut.

And it’s a decision that could deliver the airline a public relations halo. The community believes Joyce’s potential pay packet is egregious and any attempt to rein it in could help Mullen put a definitive stamp on Qantas’ board.

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.