Australia Post chair defends Ahmed Fahour’s final $10.8m pay

The chair of Australia Post has accounted for former boss Ahmed Fahour’s $10.8m pay by noting “times were different”.

Former Australia Post Managing Director and CEO Ahmed Fahour. (Stuart McEvoy/The Australian)

Australia Post chairman John Stanhope has defended former chief executive Ahmed Fahour’s $10.8 million pay package, declaring “times were different in 2010”.

The company revealed in its annual results this morning that Mr Fahour received a 21 per cent pay hike in his last year in the job, earning $6.8 million plus an additional $4m in long-term bonuses accrued over the last three years.

Mr Stanhope described the parting pay package as the honouring of a commitment, but said community expectations had changed since Mr Fahour signed his contract in 2010.

“Back in 2010 if you looked across the board at the sorts of contracts that were being written for senior execs and CEOs, what was prepared was a normal type of contract to attract a very talented executive,” he said on a media call. “You need to understand, when you talk about $10m, part of that is $4m spread over three years. It wasn’t a $10m per annum contract, it was the culmination of a finalisation of a long-term incentive plan.

“Times were different in 2010, there is no question about that. None of the current board was here in 2010.

“[The pay level] was aimed at enticing a high-level, talented executive to transform Australia Post, that was the basis of that contract. We have observed our obligations under that contract. And going forward, the new CEO will not be on a long term incentive scheme.”

The details of his pay were released this morning fulfilling John Stanhope’s promise to increase transparency in the pay policies of the government-owned entity.

The 51-year-old Mr Fahour will also receive $3m when he turns 60 as part of the post office’s old defined benefits pension scheme.

This is less than originally thought because Fahour opted in and out of the scheme over the course of his seven years in the position.

Even so, the pending defined benefit entitlement, combined with last years pay and accrued long term bonuses equals $13.8m.

His 2016 year pay of $5.6m was attacked by the Prime Minister, with Malcolm Turnbull saying “I think it is too high.”

Fahour missed out on a $2m bonus last year because he didn’t win any new government contracts and, in doing so, failed to meet a key performance target.

Fahour is also serving his final six months on the Aramex board which means he will earn some fees from that company after he orchestrated Australia Post’s $200m investment in the Middle East-based logistics company in return for a 10 per cent stake.

Former Blackmores boss Christine Holgate starts as Australia Post’s new chief executive in October.

Her pay will be limited to a maximum $2.8m, including a $1.4m base salary and bonus, with all long-term bonuses cancelled for senior executives.

“Will that satisfy everyone in the community? Probably not,” Mr Stanhope said. “But we’ve done what we think we should do in recognising community expectations have changed.”

Ahmed Fahour announces his resignation at Australia Post HQ in Melbourne. (David Geraghty/The Australian)

The pay details came as Australia Post released its 2017 financial year profit of $126.1m on a 3.7 per cent increase in revenues to $6.8bn.

Letter volume fell by a record 11.8 per cent and the division lost $180.2m.

Acting chief Christine Corbett noted: “All government areas at all three levels, all major corporations, all small businesses and consumers are shifting to digital.

“We did forecast that, it’s at the high end of our forecasts but really in line with expectations. We expect the decline to continue.”

Ms Corbett said she didn’t put her name forward for the CEO role as she couldn’t see herself staying at the company for another five to seven years.

“I have been with Australia Post for 27 years, and have really enjoyed every single day and continue to every single day,” she said. We’re now at the next stage, and it’s another five to seven year commitment. After 27 years, to commit to another five to seven years was something I stared into and I think given the size and responsibilities, it needed someone who could give that long term commitment. I didn’t think I was able to do that.”

The loss in letters was offset by a 4.8 per cent increase in parcels profit to $299.7m.

Acting chief Christine Corbett said “with new entrants to the market contributing to overall growth in eCommerce volumes we expect our parcels business to continue to grow, allowing for reinvestment in customer initiatives like MyPost, parcel lockers and digital trusted services.”

The company is presently negotiating with Amazon to see what role it can play in that firms Australian expansion.

Parcels boss Bob Black earned $1.6m, up from $1.5m the previous year. Corbett, who is acting chief and chief customer officer, earned $1.5m, digital boss Andrew Walduck earned $1.4m, as did CFO Janelle Hopkins and services boss Chris Blake.

Under Fahour the policy of releasing executive pay was wound back to include only pay targets.

The company met its service obligation targets with 98.7 per cent of letters delivered on time and 98.8 per cent of the country receiving deliveries five days a week.

Fahour was instrumental in transforming Australia Post into a parcels based business to offset the inevitable end to regular mail delivery.

Last year, as letter volumes sank, international parcel volumes increased by 41.2 per cent and domestic parcel volumes increased by 5.6 per cent.

The letters business has lost $1.3bn since 2008, with volumes falling by 45 per cent.

In an interview, Corbett said it was impossible to say just when the mail business would stop altogether but at some point it was inevitable.

Post received a boost last year when the government increased stamp prices to $1 and allowed variable delivery, with express post attracting higher charges.