QBE sets Pat Regan’s exit pay, grants and share rights lapse

QBE has limited former CEO Pat Regan’s exit pay to $310,000 following his departure over inappropriate behaviour.

QBE announced the exit of CEO Pat Regan last week. Picture: Britta Campion / The Australian

QBE Insurance has limited former chief executive Pat Regan’s exit pay to $310,000 following his departure for inappropriate behaviour, with about $9m in share grants and rights forfeited.

In a statement on Wednesday, QBE said Mr Regan would receive a $310,000 payment in lieu of a reduced notice period, along with any leave entitlements he is owed. But the company was clear Mr Regan would not receive “any grants” under its 2020 bonus scheme, and that all unvested share rights would “lapse immediately”.

QBE’s statement said Mr Regan formally ceased employment with the group on September 8.

The insurer last week announced the sudden departure of Mr Regan, saying his behaviour showed “poor judgment” and included communications that fell short of standards in its code of ethics and conduct. QBE didn’t provide further detail on the conduct and chairman Mike Wilkins took the reins as chief executive as well as leading the board.

QBE’s annual report for calendar 2019 showed Mr Regan held 915,538 shares in the insurer. The stock closed 3.2 per cent lower at $9.48 in on Wednesday.

Mr Regan’s latest director’s interest notice, lodged in May, showed he directly held 833,315 ordinary QBE shares, while his spouse held 218,960 shares.

On Wednesday’s closing stock price Mr Regan’s direct holding was valued at almost $8m.

There will be some pain for Mr Regan, though, in relation to his exit package. At the date of the annual report, he also had 773,138 conditional rights to ordinary QBE shares, reflecting a maximum value of about $9m. He also acquired 359,310 unlisted rights and more than 11,000 notional bonus shares, disclosed in the latest ASX filing.

While some shareholders and analysts applauded the move by Mr Wilkins to act quickly to remove Mr Regan, others wanted more board disclosure about the nature of the CEO’s communications, to be able to gauge whether his axing was warranted.

It’s (Mr Regan’s exit pay) “pretty much consistent with the company’s tough stance on such matters,” Bell Potter analyst TS Lim said on Wednesday.

Several investors had been concerned that Mr Regan’s departure may lead to legal action against the company by the former CEO, but one said on the basis of anonymity on Wednesday that the relatively small payout suggested the board had “enough material” to warrant his departure.

“It’s a very hard stance to take, they (the QBE board) must feel confident,” the QBE shareholder said.

Mr Regan pocketed nearly $US4.43m ($6.1m) for 2019, which included a base salary of almost $US1.46m and a cash bonus of $US665,000.

For 2019, Mr Regan was awarded 68.5 per cent of his short-term bonus or executive incentive plan, down from 98.6 per cent the prior year.

The Australian last week revealed that QBE had tapped law firm MinterEllison to conduct a sweeping review of Mr Regan’s communications, which was presented to the board ahead of his exit.

Sources said it was ongoing communication with a female US-based employee — who was part of QBE’s future leaders talent pool — via texts, email and a video conference call that became unwelcome and ­inappropriate, which ended Mr Regan’s tenure. The communication was not always work-related.

The insurer is conducting an external and internal search to find a successor to Mr Regan.

In QBE’s statement last week, Mr Wilkins said: “All employees must be held to the same standards.”