In the great tradition of Australian corporate mea culpas, the Qantas board has decided to give itself a very light wrist tap following its damning governance report into its performance and management.
The report — by former McKinsey partner Tom Saar, whose old consulting company has a major contract with Qantas — says everything that observers have long noted: the board was in thrall to ex-CEO Alan Joyce, was short in skills, was too reactive, was too collegiate. The fact Qantas needed an expensive external review to tell it this says all you need to know about the airline.
The national carrier had a “command and control” leadership style with “centralised decisions and an experienced and dominant CEO”, Saar said, adding that the board was financially, commercially and strategically oriented but that this should have been ”complemented by enhanced focus on non-financial issues, employees, customers and all stakeholders”.
Qantas chairman Richard Goyder and chairman-elect John Mullen said: “The board’s mode of engagement with management did not always achieve the right balance between support and challenge.”
As part of its wrist-slap, directors on the board between 2022 and 2024 who still remain with the company will receive a 33% reduction of their “base” or cash pay this year. This won’t affect departing directors Jacqueline Hey, a former chair of both Bendigo and Adelaide Bank and AGL, and Maxine Brenner, a director of Telstra, Woolworths and Origin Energy.
But financial impost on some directors should be seen in the context of a board stuffed with multi-millionaires, one that has continued to hand itself pay rises, even as Qantas forced a two-year pay freeze on its staff that preceded annual salary rises of just 3%. For example, Goyder’s remuneration for his part-time role jumped from $442,000 in 2019-20 to $604,000 three years later — a rise of 37%.
There is the usual litany of promises in response to the report’s recommendations, but besides their own small penalties, the board’s only material response has been to slap its senior executives, including departed CEO Alan Joyce, with bonus cuts totalling $14.1 million for the 2023-24 financial year.
But Joyce’s headline $9 million cut to his bonus — about $5 million after tax — is only a rounding error on the $130 million or so he banked during his time as CEO. Despite being at the helm during a string of scandals, he still walks away with almost $15 million for his final year. Let’s also not forget that Goyder signed off on a $17 million share sale by Joyce, while they both knew the ACCC was investigating Qantas for selling seats on cancelled “ghost” flights.
The remaining unanswered question by the Qantas board is why Joyce, someone who has so badly affected the reputation and value of a once-iconic company, is getting any bonus at all. If someone further down the management ranks inflicted that sort of damage, they wouldn’t just lose their bonus, they’d lose their job. Joyce will also continue to reap long-term bonuses under previous remuneration plans.
As with so many of Qantas’ announcements, the spin has worked a treat. Headlines peppered with “Pay slashed” make it sound as if Joyce has been seriously punished, but the starting figure was obscene to begin with.
The timing of the report is worth noting, too, coming before Federal Court Justice Michael Lee has decided the quantum of damages that the airline must pay for the illegal sacking of 1,700 workers on Joyce’s watch. Whatever that quantum is, you can bet it’s going to be somewhat larger than the handful of millions withheld from already wealthy executives. Qantas has already paid $120 million to settle the ghost flights debacle. The timing also neatly clears the decks for another multibillion-dollar profit result in three weeks.
Plus, the fact that current CEO Vanessa Hudson was included in the senior management who had their bonuses cut surely casts doubt on whether she was the best candidate to lead the company.
