Kogan chiefs ‘deserve $130m’

Kogan.com chair Greg Ridder has declared that the retailer’s founder, Ruslan Kogan, is “the smartest guy in the room”.

Kogan.com chair Greg Ridder has declared that the retailer’s founder, Ruslan Kogan, is “the smartest guy in the room”. Picture: Hollie Adams

Kogan.com chair Greg Ridder has declared that the retailer’s founder, Ruslan Kogan, is “the smartest guy in the room” and, along with finance boss David Shafer, deserved the more than $130m in long-term bonus payments.

Mr Ridder said the two had run the $2.59bn company for the past four years working for close to nothing, arguing that they were the best technology retailers in Australia.

“We are robust, we are deeper than people realise and I’ve got some guys [Ruslan and David] basically who can play 3D chess while other people are playing checkers,” Mr Ridder told The Australian.

Despite Mr Kogan, who founded the online retailer, and Mr Shafer being major shareholders in the company, Mr Ridder said the long-term incentives that would award 6 million shares to them was vital to retain their services.

And even if the resolution is rejected by shareholders at the upcoming annual meeting, the company has committed to handing over the options to the men anyway.

“I want to know that Ruslan is there to drive the hardest driving performance, and he is the smartest guy in the room, he is there to drive that value for all of us. [We are] making sure there are big incentives for a big outcome.

“These guys have been working for close to nothing in the four years they have been with the company. (In) Ruslan’s cohort of comparable companies that the independent expert drew in this, he was the lowest-paid executive among 16 entities and yet was the second highest performing of all those entities,” Mr Ridder added.

“This is the first time they will receive an LTI (long-term incentive).”

The pair’s remuneration does not include the millions of dollars in dividends the duo have received through their share ownership. Mr Kogan has a 15 per cent stake in the company and Mr Shafer 5.75 per cent.

“I just don’t want them to go anywhere else,” Mr Ridder said.

“They are the key and, together … that gives us just great confidence about what sort of future we can look forward to.

“These guys are extremely high performers [and] have built a wonderful business on an amazingly good footing. [They have produced] almost a 390 per cent total shareholder return against the market that was doing very, very little.

“They are the best tech retailers in Australia. Keep them there, and there is 100 per cent alignment to shareholder interests … the vesting date is three years from now.”

The potential rewards flowing to Mr Kogan and Mr Shafer almost top $140m due to a stellar run in the Kogan.com share price since the global sharemarket rout in March as the COVID-19 pandemic emerged.

It was about that time the Kogan remuneration committee advised an LTI package for the pair, their first since the retailer floated on the ASX four years ago. A strike price was chosen of $5.29, derived from the three-month volume-weighted average price to April 30 that took in the global equities collapse in March.

In May, when the LTI was announced to the market, these ­bonuses would have delivered 3.6 million options to Mr Kogan and 2.4 million to Mr Shafer. On the share price at that time, Mr Kogan’s options were worth $31.8m and Mr Shafer’s $21.24m.

They were immediately in the money and, with Kogan shares now sitting above $23, the LTI package is worth $138m, of which more than $100m is profit.

“It is more about how do you align incentives for long-term performance,” Mr Ridder said.

“What is important here is to link performance and the interest of all shareholders, and making sure there are big incentives for a big outcome, driving the business strongly.”

He also defended the decision to award the options even if the resolution was defeated at the AGM next month, saying it was common practice for ASX companies to go to shareholders with an alternative settlement should they not approve the issue of equity grants.

“Our independent directors have come to the conclusion these are the best guys to have at the helm,” he said.

Mr Ridder said shareholders had also been handsomely rewarded recently, including a capital raising that saw investors who took up shares enjoy an immediate 44 per cent gain, with that stock now up more than 100 per cent.