Covid’s corporate wake up call: cut from the top

Qantas chief Alan Joyce takes major pay cut as Treasurer, investors call on nation’s biggest companies to show a social conscience.

Qantas Group CEO Alan Joyce has earned $1.7m in the 2020 financial year after three months with no pay and refusing to accept a huge slab of shares. Picture: Flavio Brancaleone

Qantas chief Alan Joyce will take a major pay cut as Josh Frydenberg and large investors call on the country’s biggest companies to show a social conscience while thousands of employees are stood down during the pandemic.

Mr Joyce will take home $1.7m, an 83 per cent cut from his $9.9m salary last year, joining Medicare boss Craig Drummond and Mirvac chief executive Susan Lloyd-Hurwitz in cutting their take-home pay during the COVID crisis.  While the federal Treasurer would not comment directly on the reduction in Qantas executive remuneration, he indicated companies should act in line with community sentiment.

“Ultimately executives and boards are accountable to their shareholders and while it is up to them to decide how much to pay their staff and how they distribute their dividends, they need to be mindful of community expectations,” Mr Frydenberg said.   

Australian Industry Group chief executive Innes Willox said workers from all walks of life were taking pay cuts.

“A lot of business are doing it very tough at the moment and a lot of people, no matter what they earn, are taking home less,” he said. “Every organisation is dealing with this in their own way and there are no set rules in these dire economic times.’’

Mr Joyce and his five senior executives at Qantas pocketed just under $7m, down from $22.4m last year. The reduction was the result of the CEO, his ­executives and directors taking no pay for three months and wiping out short-term bonuses in ­response to the pandemic.

About 20,000 employees remain stood down and on JobKeeper, while 6000 others face redundancy and 2420 jobs are outsourced.

As well as forgoing more than $500,000 of his $2.16m base salary, Mr Joyce also declined to ­accept $1.4m worth of shares allocated as part of the airline’s long-term incentive program.

A decision on whether the 343,500 shares would ultimately vest or lapse was deferred until next year.

Medibank scrapped short-term bonuses for its executives, which saw chief executive Craig Drummond’s total package fall to $2.32m, from $4.1m a year early. Mr Drummond and his executive team still saw some long-term performance rights vest, although Medibank’s entire executive ­remuneration bill fell by $4m.

Property giant Mirvac was ­another to spike cash bonuses. Chief executive Susan Lloyd-Hurwitz saw her pay fall to $3.1m from more than $7m a year earlier. Mirvac also instituted a 20 per cent cut to base salary between April and June and allowed top executives to take unpaid annual leave.

Other companies have sparked criticism for increasing the take-home pay of executives and paying bonuses while receiving government assistance.

The board of casino operator Star Entertainment, one of the biggest recipients of JobKeeper payments, used its “discretion” to pay four of its top executives $1.4m in bonuses.

Construction major Lendlease, led by Steve McCann, paid out $10.03m in incentive payments while collecting $15m in government wage subsidies across the globe, including $9.7m from the Australian government.

Plumbing supplies group Reliance Worldwide paid its executives more than $2m in bonuses. While it did not receive JobKeeper, it collected $4.1m in British and European wage subsidies.

Retailer Accent — which operates chains such as The Athlete’s Foot — received $13m in JobKeeper payments and gave its CEO a $1.2m bonus.

Retail landlord GPT, online job site Seek, and homeware retailers including Nick Scali and Adairs also announced large shareholder payouts as their bottom lines were propped up by the JobKeeper scheme.

Institutional Shareholder Services told The Weekend Australian that companies that paid executive bonuses should expect an investor backlash.

ISS, one of the world’s largest proxy firms, advises clients, including major hedge funds and superannuation funds, about how to vote on proposed executive pay at annual general meetings.

“There is a broad expectation that in those situations that companies have performed poorly, and regular employees have suffered, that executives’ pockets aren’t lined with bonuses,” Mr Vas Kolesnikoff said. “Those companies that receive JobKeeper payments and have stood down employees … when you are doing that and your financial results are down, there doesn’t seem much justification for a bonus. (Bonuses) are supposed to reflect good results.”

Qantas chairman Richard Goyder said management and the board had shown important leadership by taking no salary for several months and then a ­reduced salary for months after that.

“This is obviously not the same hardship as those stood down or facing redundancy, but it comes at a time when demands on management are greater than ever,” Mr Goyder said.

“When travel restrictions first hit, Alan and the management team acted quickly to put most of the business in hibernation and develop a recovery plan.

“Liquidity has been strengthened and difficult decisions are being made as part of carving out $15bn in costs over the next three years. Sadly this has a very real impact on thousands of people.”

Other Qantas executives saw their salaries fall 69 per cent overall, after also taking no pay for three months.

Jetstar CEO Gareth Evans was the second-highest paid after Mr Joyce, collecting $1.2m, followed by former Qantas International CEO Tino La Spina, who earned $1.6m. Mr La Spina left the airline on September 1 after 14 years of service.

All executives have now resumed their salaries at 85 per cent of their base pay, while Mr Joyce was being paid 65 per cent of his $2.15m base salary.

Qantas was one of the biggest beneficiaries of the government’s JobKeeper program, in the period to June 30, receiving $267m in payments.

The allowance was continuing to support close to 20,000 workers who remained stood down.