How the Napoleon of aviation lost the Qantas pay battle

Australia’s most anticipated pay and governance adjudication has landed – and it isn’t pretty.

Qantas operated under a chief executive-led “command and control” culture, the board governance review found. That makes former leader Alan Joyce the airline’s equivalent of Napoleon.

Former Qantas chief executive Alan Joyce had his pay wings clippedCredit: Dion Georgopoulos

The High Court decision that Qantas illegally sacked 1700 workers and the competition watchdog’s $120 million fine for selling tickets on ghost flights were his Waterloos.

Qantas’ failings cost Joyce $9 million in pay, contributed to his early retirement and put a sizable dent in his once-enviable reputation as a leader in aviation.

The financial successes that spawned Joyce’s cult-like following among investors were ultimately responsible for the company’s board and management giving Joyce largely unfettered decision-making power.

No one inside the airline seemed willing or able to hold that power to account. So when the customer satisfaction wheels began to fall off following the COVID-19 pandemic, there were no dissenters to challenge Joyce’s decisions.

And like so many executives or companies that have found themselves in crisis, an overemphasis on profit came at a cost to the company’s relationship with its stakeholders. In Qantas’ case, those stakeholders were its customers, its staff and the competition regulator.

Eventually, shareholders shared the pain as mistakes translated to Qantas’ share price.

Qantas is something of a parable about how a highly and long-time successful executive can capture a governance team in their thrall. And it is a lesson for all boards about retaining a chief executive beyond their use-by date.

The report found that there was “too much deference to a long-tenured CEO who had endured and overcome multiple past operational and financial crises”.

When the customer satisfaction wheels began to fall off following the  COVID-19 pandemic, there were no dissenters to challenge Joyce’s decisions.

While this report on Qantas ostensibly put the blame for the disastrous events of 2023 at the feet of Joyce, it was an underquestioning and potentially underengaged board that enabled it.

“The group had a ‘command and control’ leadership style with centralised decisions and an experienced and dominant CEO. This contributed to a top-down culture, which impacted empowerment and a willingness to challenge or ‘speak up’ on issues or decisions of concern,” the report concluded.

As a corollary to that, the board didn’t have a remuneration framework for Joyce that allowed it enough discretion to adjust or claw back short-term and long-term bonuses.

Ultimately, the board, which has been overhauled over the past 18 months (including the appointment of a new chairman, John Mullen, who replaced Joyce’s biggest admirer Richard Goyder), has pared back about $9 million from Joyce, but he will still be eligible for additional long-term bonus payments this year, next year and the year after. The size of those payments is unclear because they depend on company performance conditions.

Even after losing $9.3 million bonuses, he will still get a $1.8 million bonus and a total of $14.9 million in pay for the 2023 year.

You are unlikely to see Joyce gracing the aisles of Aldi.

The revamped Qantas board needed to walk a thin line, to recoup Joyce’s excessive 2023 remuneration while acknowledging many of the positive contributions and Napoleonic-type successes he made to the airline’s financial success over many years.

They were also acutely aware of the potential for Joyce to legally challenge his revised remuneration.

But the current board also appreciates its customers’ thirst for Joyce retribution.

The Qantas brand took a massive hit in the years immediately following COVID.

The report, which was authored by former McKinsey partner Tom Saar, highlights a series of actions or events involving Qantas that led to a loss of trust among stakeholders in the 12 months prior to October 2023, including customer service shortcomings such as late flights, lost baggage and call centre waiting times.

While Qantas can be forgiven for some of these issues that were outside its control, the handling of customer COVID credits and post-COVID pricing were huge strategic mistakes that demonstrated a level of dangerous disdain for customers – the people responsible for the airline’s revenue.

When asked about the most significant takeaway from the report, Mullen said it was “the importance of facing into these things [mistakes] when they happened. I am in a slightly privileged position because I wasn’t here, but I do think it’s absolutely critical that companies really analyse what happened, what went wrong, [provide a] mea culpa [and] don’t try and gild the lily. And announce what you are going to do about it.”

But not everything goes to plan in the fog of war, even for aviation’s best-known general.

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