Behind the sudden exit of Boral finance boss Tino La Spina, and why employers are coming around to wage rises

Ryan Stokes decided to call time on the former Qantas executive Tino La Spina at Boral.

Former Boral chief financial officer Tino La Spina.

It’s the second time in 18 months that seasoned finance executive and former Qantas manager Tino La Spina has fallen victim to a cost-cutting drive.

La Spina, who through his career had been working his way to a chief executive posting, has become the highest-profile casualty of Ryan Stokes’ efforts to bring Boral back to earth.

The well-regarded La Spina simply outgrew the role of chief financial officer for what is now a much smaller Boral. La Spina, who last year had an annualised $1.8m remuneration package, was advised of this on Thursday night and given a few days to reflect on the situation. He opted for an immediate exit.

La Spina joined Boral from Qantas in October 2020. At the time his role at Qantas as head of international essentially didn’t exist any more, as borders around the world shut and Qantas was forced to ground much of its fleet in the depths of the Covid crisis.

Qantas, too, was in desperate survival mode and was cutting back to the core.

Seven Group CEO Ryan Stokes took control of Boral last year. Picture: Jane Dempster.

At one stage La Spina was in the management succession mix at Qantas, and after a five-year stint as chief financial officer during one of the airline’s most profitable periods Qantas chief Alan Joyce tested him with the high-profile international role. Then the pandemic struck.

Boral chief executive Zlatko Todorcevski, himself appointed a few months earlier, recruited La Spina under a very different board, tapping him for a strategic role including M&A and capital allocation. As soon as La Spina joined he worked closely with Todorcevski on Boral’s planned $4bn of asset sales and thrashed out the building materials player’s new small-target strategy.

Then Stokes’ Seven Group launched their slow-moving raid on Boral using creep provisions, before eventually building up their stake to 70 per cent to take control of the board.

Stokes on Tuesday described La Spina’s exit as a reflection of the “reduced operational footprint and size” and urged more speed on Boral’s transformation. Under­lying tensions were clear in Stokes’ decision not to acknowledge La Spina by name during the chairman’s short statement about the CFO’s exit.

Tino La Spina during his days as Qantas chief financial officer. Picture: AAP Image

La Spina, who was not available to comment, helped Todorcevski undo the excesses of Boral in the Mike Kane deal-making era. This included last year’s $2.9bn sale of US building products business Headwaters and the $1bn US fly ash sale. There has been a whirlwind of other exits, including joint ventures ranging from timber to bricks.

The exits meant that Boral had become and much smaller, Australia-focused business. The one-time blue chip that spun out energy giant Origin is now valued at a little over $3bn, and with few other significant assets left to sell, the chief financial officer, who was looking at an annualised remuneration package of $1.8m, was getting too expensive.

While Boral has been a victim of its own missteps, it’s now the external environment undermining Todorcevski’s attempts to stabilise the company. Cracks appeared again last month with heavy rain and flooding across NSW and Queensland slicing an expected $23m from Boral’s earnings. In addition, Boral is being squeezed by sharp increases in diesel and coal prices. It is only in the last few weeks that Boral has clawed back diesel prices in the form of higher prices.

Add to that wages pressure and supply chain costs which are weighing on the balance sheet. Savings still have to come, with nothing and no one off limits.

Why employers are coming around to wage rises

The deadline for written submissions for the annual wage review has just closed and this year the argument shifts firmly from Covid to the cost of living and inflation.

The annual arm-wrestle between employers and unions is on again, but some ground has been ceded over inflation, which is pushing up costs for all.

Employer groups including the Australian Industry Group, the Australian Retail Association and Housing Industry Association are also facing an additional challenge coming into this year’s living wage review.

The pool of available workers in Australia is fast shrinking – which means employers face paying a premium for new workers. Some economists are tipping unemployment to hit 3 per cent next year, numbers not seen in the modern Australian economy ­before.

The Reserve Bank is looking for signs of wages growth to add to its rate hike case. Picture: NCA NewsWire

An additional cost for employers is looming from July, when the superannuation guarantee is set to rise from 10 per cent to 10.5 per cent. This jump in super costs – which is still paid by employers – is not measured in the closely watched wage price index.

Minutes for the April board meeting released by the Reserve Bank on Tuesday noted the central bank is weighing up “the direct and second-round effects” of the recent increase in fuel, food and other commodity prices. Here they concluded these pressures would result in a further increase in inflation over coming quarters.

While prices were rising more generally, the RBA said there had been a gradual increase in overall wages growth.

Tellingly, wage growth across enterprise agreements remained subdued, with most of the gains coming in individual pay arrangements, the RBA minutes said. A broader breakout of wages under enterprise agreements will give RBA governor Philip Lowe the ammunition to move even more aggressively on interest rate rises.

The Fair Work Commission, which oversees the process, doesn’t have the power to make changes to award agreements to match cost of living pressures outside the annual wage review.

That is why this year’s annual wage review, to be released mid-June, will be more closely watched than normal.

The Paul Zahra-led Australian Retailers Association represents a sector that employs 1.3 million people. It is among the hardest hit in trying to secure staff as the economy roars back to life coming out of last year’s Covid lockdowns.

Australian Retailers Association chief executive officer Paul Zahra.

The ARA is backing a minimum-wage increase to match the pace of underlying inflation, which at the current run rate is pushing 2.6 per cent.

“With higher costs driving higher prices, there is an acknowledgment that wages should also increase,” the ARA said in its submission. “Any increase in wages that exceeds underlying inflation should be offset by productivity gains,” it added.

The ARA also urged the Fair Work Commission to be mindful of the impact that any increase in wages could have on broader prices at a time when external factors are already creating price-driven inflation.

The ACTU, which sets the tone for employees under the annual review, has put inflation at the centre of its push for a 5 per cent increase in the national minimum wage. “The economy and business are in a strong position,” the ACTU contends. “Yet workers are seeing their wages go backwards in real terms – the result of low pay increases and the bite of rapidly rising prices.”

The current underlying drivers of inflation “have nothing to do with the spending habits of low-paid workers,” the ACTU adds.

Inflation sand a tight labour market mean wage restraint will be out of the window.

The Australian Industry Group has been more cautious around wage rises but has still put forward a proposed increase of up to 2 per cent. This compares to Ai Group’s push for a 1.1 per cent increase last financial year.

The 2 per cent lift equates to an increase of about $15.45 per week in the National Minimum Wage, bringing it to $788.05 per week. But Ai Group points out that other forces are at work for the nation’s lowest paid.

This includes the 0.5 per cent Super Guarantee increase from July 1, while the Low and Middle Income Tax Offset in the pre-election budget would result in the equivalent of a 3.8 per cent increase in pre-tax wages.

While sales might be recovering for businesses, this didn’t translate to profit growth, AI Group said. Businesses are being squeezed by supply chain disruptions, significantly increased input costs, skill and labour shortages and weak productivity growth.

The Ai Group also warned that union calls for a proposed minimum wage increase of 5 per cent would “wreak substantial economic damage”, destroy the jobs and reverse the recent strong growth in full-time employment.

johnstone@theaustralian.
com.au

Originally published as Behind the sudden exit of Boral finance boss Tino La Spina, and why employers are coming around to wage rises