Pay questions to be answered as Coles heads towards demerger

A $4m sign-on bonus for new CEO Steven Cain will be just one area that needs explaining as Coles heads for a demerger.

Pay issues need answering as Coles heads towards a demerger from Wesfarmers. Pic: Bloomberg

Last year outgoing Coles boss John Durkan released an independent economics report showing how poorer people were forced to cut back on fresh produce to cope with rising costs of living.

Today, subject to West Australian court approval, Wesfarmers will release documents confirming the new boss of the demerged Coles, Steven Cain, will collect a cash sign-on bonus of close to $4 million, plus a cash weighted short term bonus, with minimal details of his hurdle rates.

The two pictures don’t sit well together and will need to be explained by Wesfarmers when it releases the scheme documents.

The sign-on replaces the mostly scrip-based incentives Cain may have collected if events worked out well at his former employer, Metcash.

He left the wholesaler before the hurdles could be tested.

Cain’s pay policy at Coles will be one area of interest.

New Coles CEO Steven Cain.

Another will be arrangements for Wesfarmers executives, given it is offloading 85 per cent of the capital-intensive Coles to its shareholders.

Presumably this means Wesfarmers’ executive pay will be all but divorced from Coles’ performance, except at a headline level.

These will need some explaining, as Wesfarmers chose to put 20-year veteran director and joint venture partner James Graham as chair of the supposedly independent Coles.

Durkan has raised the bar for Cain because when first quarter sales figures are released it will show Coles has outrun Woolworths by a factor of some four times after seven straight quarters of underperformance.

The trick for Cain will be to profitably sustain that performance, but Durkan’s final quarter will make the hurdle that much tougher to pass.

Wesfarmers went into trading halt this morning ahead of the WA court hearing.

An analysts’ briefing was tentatively set for this afternoon.

John Durkan has set a high hurdle for his successor. Pic: Stuart McEvoy