Boral pays outgoing CEO Mike Kane $2m after US accounting scandal

Outgoing chief executive Mike Kane scores $2m sendoff despite financial fallout.

Boral’s blockbuster $3.5bn acquisition of Headwaters in 2016 under Mr Kane, split shareholders. Picture: Renee Nowytarger. The Australian

Construction materials giant Boral has given its outgoing chief executive Mike Kane a $2m golden handshake, as the company continues to reel from the financial fallout of an accounting scandal that plagued its US windows business.

Boral gave Mr Kane $2.037m — the equivalent of a year’s salary — in “separation payments”, which the company said was in line with his employment contract, more than doubling his remuneration. But given it was a termination, there was no short-term incentive payment, and the board vetoed all his long-term incentive awards which totalled $1.67m.

It follows a torrid period for the Sydney-based company, marked by a series of downgrades and the revelation in December of financial irregularities at its North American windows unit.

Under Mr Kane’s contract, he was entitled to a $2m windfall if Boral terminated his contract without cause. Had he chosen to resign, he would have had to give six months’ notice or the company could have chosen to pay him out in lieu of that notice period.

“Boral may terminate Mr Kane’s employment at any time by giving Mr Kane 12 months’ written notice. Boral may elect to make a payment in lieu of the notice period,” Mr Kane’s contract says.

“In those circumstances … Mr Kane will receive a separation payment, which will include any amount paid in lieu of notice, equal to 12 months’ TFR (total fixed remuneration). Mr Kane will not be entitled to any STI in respect of the year of termination unless the board determines otherwise.”

Boral’s remuneration committee chairman John Marlay said Mr Kane parted on those terms, in the company’s annual report.

“In February 2020, we announced that Mike Kane was expected to finish in 2020 as CEO and managing director of Boral after more than seven years in the role. This was brought forward earlier than previously intended, and Mike’s separation payments … are consistent with the disclosed terms of his employment contract and Boral’s equity plan rules,” Mr Marlay said.

Two months before his departure was announced last December, Mr Kane said he had no intention of stepping down early. But chairman Kathryn Fagg had already held a series of high-level meetings with top shareholders shortly after the accounting scandal broke as tensions mounted over both the near-term performance of its troubled US business and the long-term strategy of the group.

The company listed Mr Kane’s $1.67m in performance rights in its accounts. But said: “as a result of the board’s decision to lapse all of the former CEO’s LTI awards, the amount of $1,674,700 included in the table for accounting purposes is not paid or payable.”

Boral also paid David Mariner, its former North America president and chief executive who stepped down in May, $866,000 in separation payments, bringing his total remuneration to $1.59m.

“His remuneration on departure was consistent with prior contract disclosures, with all untested deferred STI and LTI (long-term incentive) grants lapsed in full,” the company said.

Boral’s blockbuster $3.5bn acquisition of Headwaters in 2016 under Mr Kane, split shareholders, some of whom were concerned about the earnings outlook from the deal.

In February, Boral said earnings were overstated in its US windows business, acquired as part of the Headwaters deal, by $US24.4m ($34m) from March 2018 to October 2019. Audit reviews found the accounting fraud was confined to the windows business with both the vice president financial and financial controller of the division axed from the company.

The probe found finance staff within the windows business “manipulated accounts and financial statements primarily to artificially inflate the overall profitability and health of the windows business”, Boral said in a statement.

The financial misconduct occurred over a 20-month period concluding in October 2019.