Why Ahmed Fahour is worth every cent of his $5.6m Australia Post salary

As Australia Post goes into battle against global giants, the PM should realise that Fahour’s $5.6m salary is peanuts.

Australia Post chief executive Ahmed Fahour at the company’s new Melbourne parcels facility.

The world’s parcel express transport giants such as DHL, FedEx and the Japan Post-owned Toll must have been chuckling with joy at the controversy over the salary of Ahmed Fahour.

From the Prime Minster down, Australians have compared Fahour’s job as chief executive of Australia Post with similar post office executives around the world. It’s absolutely the wrong comparison because Fahour is also heading a parcel express transport business that competes with the global majors. And he is winning!

When Ahmed Fahour took over the job of head of Australia Post, the likes of DHL, FedEx and Toll saw Australia as rich pickings because a government-owned post office dominated the parcel market. There seemed no way public servants could compete with the executive and capital firepower of the giants.

And they would have been right except that the ALP government of the day plucked out an executive who, with the benefit of hindsight, should have been made CEO of the National Australia Bank — Ahmed Fahour.

Fahour speaks his mind and was not universally popular at NAB around 2008. When he was passed over at NAB, Fahour went to Australia Post because he saw the potential to dominate the parcel business and develop an enormous government-owned business — a task few people in Australia have achieved against international competition and one that is rare in the world.

After NAB, Fahour had something to prove.

I recognise that around the world we are correctly starting to debate whether our top executives are being paid too much and there is a clear argument that high pay does not always lead to better results but let’s not focus that debate on any one CEO — and certainly not Ahmed Fahour.

In international terms, a salary of $5 million for Fahour’s task is peanuts. If the government is not prepared to pay competitive salaries for top executives to do battle against the word’s transport majors then it should sell the post office’s parcels business immediately. It would get a huge price. Then they can appoint a low-paid public servant to supervise the final run down of the postal service.

I have not got the latest market share statistics in front of me but Australia Post (mainly via StarTrack) and Toll, a year or so back, together delivered about 60 per cent of business parcels with Australia Post the dominant player. TNT (FedEX) held 10 per cent of the market and DHL 5 per cent. In the fastest growing part of the market — parcels to individuals — Australia Post had about 75 per cent of the market share, with Toll at 10 per cent and TNT about 5 per cent.

The global majors focused every gun they had on Australia Post and Ahmed Fahour. And guess what? Australia’s highest-paid public servant beat them. And while he was doing it he took on the thankless and extremely difficult task of making the old mail delivery system work in a world of email.

Of course, part of the mail operation also helped parcels. Fahour has linked Australia Post to Qantas and Woolworths and set up deals with global players like Aramex and Lazada/Alibaba. Australia Post is going global.

It is true that Australia Post has lost market share in parcels last year. In a fast growing market driven by online shopping, Ahmed Fahour could only manage to hold parcel turnover at $3bn but he did that while holding margins and via a massive investment in new technology. Parcel profit actually rose by 8 per cent to $314m.

Poor old Japan Post paid $6.5bn for Toll partly in the belief that public servant Fahour would be a push over. Now Japan Post has changed Toll’s CEO and is about to embark on massive retrenchments. In fairness, Toll’s problems also reflect the international business.

Tongue in cheek, what Japan Post should have done was offer Fahour four times his public service salary of $5m to deliver a return on their $6.5bn investment. Alternatively, they could have offered the Australian government $6.5bn for Australia Post as long as Fahour agreed to stay on for five years.

Seriously, the Commonwealth is sitting on a business, excluding post, which is worth many billions. Until there is a global revolution in executive remuneration, it will have to pay globally competitive salaries in order to attract talent so it can compete with the majors.

One could argue that such a salary strategy does not sit comfortably with the government or with a business that has a wing that incurs big losses as part of a community service obligation (the postal service).

In that case, the government should sell the parcels business because eventually Fahour will leave.

I have not spoken to Ahmed Fahour or any people at Australia Post before writing this commentary but my guess is that there is a mile-long queue of headhunters now offering Fahour a vast increase in salary.

Our Prime Minister got caught up in populism. It was very foolish because it will cost Australian taxpayers many billions if Turnbull does not realise that Australia Post is engaged in a battle royal with major global transport groups and we can’t afford to pay public service salaries in such a deadly game.