Qantas chair Richard Goyder under pressure to dock CEO Alan Joyce’s $4.8m bonus over ‘ghost flight’ scandal
Qantas chair Richard Goyder is being urged to activate clawback provisions in bonuses awarded to outgoing chief executive Alan Joyce.
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Pressure is mounting on Qantas chair Richard Goyder to activate clawback provisions in bonuses awarded to outgoing chief executive Alan Joyce, after the consumer watchdog launched landmark legal action against the airline.
Mr Goyder is expected to meet top Qantas shareholders after the Australian Competition & Consumer Commission announced it is pursuing the company over allegations it sold tickets on cancelled flights, with fines that could total $250m.
The ACCC action comes after Qantas recorded a record $2.5bn annual profit and Mr Joyce received shares worth more than $10m as part of the company’s long-term incentive plan.
He has reaped about $125m during his 15 years as Qantas chief executive.
Influential advisory groups such as the Australian Shareholders Association say the airline needs to “think about what is appropriate” and in the best interests of investors.
“Remuneration is one of our key focus issues,” ASA chief executive Rachel Waterhouse told The Australian.
While Mr Goyder and his fellow directors can’t claw back any of the shares Mr Joyce has already received, it can cut his short-term bonus of about $4.8m, which is yet to be awarded.
Proxy advisers say former Commonwealth Bank chair Catherine Livingstone’s decision to dock $16m in executive bonuses in 2017 after the financial crimes regulator alleged serious and systemic money-laundering breaches is a precedent for clawing back incentive payments.
Under Ms Livingstone’s decision, then CBA chief executive Ian Narev became the first CEO of any major bank to have their entire annual bonus cut to zero.
Heaping further pressure on Mr Goyder is Medibank’s decision to axe all executive bonuses following last year’s cyber attack, where Russian hackers leaked the health records of more than nine million policyholders onto the dark web, sparking investor and customer class actions.
Regarding Mr Joyce’s bonus, Australian Shareholders Association chief executive Rachel Waterhouse said Qantas’s board had to “think about what is appropriate at this point in time, given the ACCC action”.
This includes potentially holding any bonus payments in escrow until the ACCC matter is resolved.
“I would broadly say that is something that the board may want to consider,” Ms Waterhouse said.
“Remuneration is one of our key focus issues. We look at every company, ask the questions of the chair. Our members think it’s really important. We recently did a survey and that’s one of the top three things that they want us to be calling out companies on: inappropriate remuneration. It needs to be transparent and needs to be realistic and benchmarked.”
Qantas has clawback provisions in its remuneration policy, “in the event of serious misconduct, breach of obligations to the group”.
Dean Paatsch of proxy adviser group Ownership Matters said: “The fundamental thing is what’s the right thing to do.
“Unequivocally Commonwealth Bank looked at all the circumstances and said the Austrac action was so serious that we’re just not doing that (awarding bonuses),” Mr Paatsch said.
“The Qantas board hasn’t had time to consider its position in relation to all of that, but it is going to have to. There is no question about that. It is going to have to work out where it stands on these issues.”
Mr Paatsch, while mindful of not pre-empting a decision from Mr Goyder and his fellow Qantas directors, said this could include deciding to award a short-term bonus in stock instead of cash, which could be held for three years and reduced, depending on the size of the potential ACCC fine, which could be a maximum $250m penalty.
“Whether it’s awarded in stock held for three years and zeroed if they get a fine of $125m – 5 per cent of its record profit. In a normalised profit sense, there have been years where it would be 10 per cent.”
Mr Paatsch said the brand damage to Qantas had been “staggering”. In 2017, Qantas was the second most trusted brand in Australia, according to Roy Morgan. It has since dived to the nation’s 13th most trusted brand.
In the past week, Qantas’s share price has shed 6.9 per cent to $5.82, valuing the company at $10.04bn. This compares with a 2.3 per cent gain across the broader sharemarket.
But according to Bloomberg, about one in five analysts covering Qantas now have a sell rating on the stock. The average 12-month target price is $8.02.
The share plunge came as Mr Joyce, Jetstar chief executive Steph Tully and corporate affairs chief Andrew McGinnes faced interrogation over Qantas’s opposition to Qatar Airways flights and accusations of slot hoarding at Sydney airport.
The savaging continued before another parliamentary committee on Tuesday, before the ACCC landed a heavy punch with its court action for alleged false, misleading or deceptive conduct.
The unions representing Qantas staff have criticised the airline’s management. Australian Services Union assistant national secretary Emeline Gaske said the alleged actions by Qantas were “yet another example of the contempt the airline holds for its customers and staff”.
Meanwhile, Flight Attendants Association of Australia federal secretary Teri O’Toole said passengers had the right to be annoyed but not by the airline’s staff. “Cabin crew did not make any of these decisions. They were made by the board and the CEO,” Ms O’Toole said.
Before the explosive revelations, Qantas had recorded a rise in customer satisfaction, which was edging closer to pre-pandemic levels.
Qantas was compelled to report to the ASX on Friday various bonuses awarded to executives, including shares worth more than $10m for Mr Joyce. The shares were part of a retention and recovery plan that resulted in non-executive staff receiving $5000 each.
Long-term incentive payments deferred by Mr Joyce over the past three years were also delivered, but he received a million fewer shares than expected.
That was due to the fact 50 per cent of performance targets were not met in that period.
Qantas indicated late last week that it would respond in full in court to the allegations made by the ACCC.
It remained unclear if the selling of tickets on already cancelled flights was a deliberate act to drive revenue, or a large-scale system failure. The ACCC’s investigations identified more than 10,000 flights that were cancelled more than two weeks before passengers were informed.
The matter is expected to be heard in the Federal Court before Mr Joyce departs the airline in November.
Originally published as Qantas chair Richard Goyder under pressure to dock CEO Alan Joyce’s $4.8m bonus over ‘ghost flight’ scandal
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