Treasury Wine Estates’ Michael Clarke planning for a pay-off

Treasury Wine CEO Michael Clarke will retire in about a year. Picture: Stefan Postles

In August next year Michael Clarke will formally collect 514,283 shares worth, at today’s share price, around $8.7 million. It will be arguably his single biggest pay packet in what has been a lucrative innings at Treasury Wine Estates.

That suggests he is backing some upside between now and then before formally handing the reins to Tim Ford, who has been named successor as CEO when Mr Clarke retires next year.

This year, on paper, Clarke’s annual stipend is $11.9 million, including $2.7 million in turn-up-to-work pay, $4 million in bonuses and $5.2 million in long-term compensation.

Clarke is a change agent who in six years at Treasury Wine has done an extraordinarily good job. But arguably it is now time for a change - to put an operator like Ford at the helm to reap the harvest produced by the great man.

Chairman Paul Rayner drew his own line in the sand to say the best was still to come.

Monday’s 10 per cent fall in the stock price, wiping $1.3 billion from Treasury’s value, is obviously a reflection of the surprise at the announcement of Clarke’s planned retirement. After all in September, when he presented his management team to analysts, the mantra was all about stability.

This was necessary because after five CFOs in four years and a string of top level departures the market wanted to know the team was settled.

It didn’t want to know the top guy was walking too.

Read more | Danger signs at Treasury

The departure won’t happen for another year, after the 2017 bonus shares vest, but still, some might wonder whether Clarke thinks the easy fruit has been picked and it’s all getting more difficult now.

With the benefit of hindsight, at the time of the late September strategy day, Clarke was perhaps preparing for change, because he basically handed the stage to his heir apparent Tim Ford.

Last week’s annual meeting came and went without any word about the departure which was important because if any company is subject to “key man” risk it is TWE.

One presumes Clarke and Rayner were negotiating terms which arguably meant there was no disclosure event until today.

Clarke is pencilled to stay for another 12 months as an adviser once he formally leaves around this time next year.

The terms of that contract are still to be formulated, according to the company.

Clarke talks about wanting to see more of his wife and aged parents, which is understandable, although he is prepared for the sake of the company to put that ambition off for another 12 months.

He is obviously angry about criticism of his tax-driven share sales, which he stressed again on Monday ad nothing to do with his commitment to the company.

On any score he has done a great job and like any change agent he has a use-by date which maybe has arrived.

The question for shareholders now is how good is Tim Ford? And how will he manage Treasury’s all-important inventory.

Michael Clarke will obviously want to keep the stock moving in the interim, which means he will keep delivering on what has been, on any reading, an outstanding performance.