IT IS never a good look when a senior executive gets a big salary package for doing a mediocre job. It is even worse when the board writes an obscenely big cheque to get rid of a dud chief executive. And it is downright gobsmacking when two senior executives stand to rip out the equivalent of more than half a company's annual profit in termination fees.  

Welcome to corporate Australia, which still has a long way to go to get executive pay more closely aligned to shareholders' interests, despite the recent changes in legislation on termination packages, and the spectre of the ''two strikes'' rule being enforced on boards from July 1 - if it gets through the Senate.

While the changes in termination packages are a step in the right direction - shareholders get to vote on packages valued at more than a year's base salary - they can only work if the guardians of the country's $1.3 trillion retirement savings start using their votes on remuneration, directors and strategy.


Right now, the best that can be said of many super funds is they are apathetic; they have the power, but rarely use it.

Under the Corporations Act, shareholders can lob a protest vote against the re-election of directors. Every year, about a third of directors must seek re-election, but shareholders rarely refuse to back them.

Companies such as Babcock & Brown, Allco, ABC Learning, HIH and One.Tel hardly heard a word of protest from institutional investors before they collapsed. Indeed, at the annual meetings before the collapse of HIH and One.Tel, more than 90 per cent of shareholders voted for the re-election of directors.

In the case of termination packages, the new law will be tested for the first time on Wednesday when shareholders get to vote on AXA boss Andy Penn, who stands to make $17 million after his position was made redundant when the company was broken up and sold to AMP and AXA's French parent AXA.  

While nobody is suggesting that Penn did a bad job during his 20-year career at AXA, such a high payout is rightly being questioned and proxy advisory group RiskMetrics recommends shareholders reject it. However, given AXA's French parent has a 51 per cent holding, RiskMetrics' recommendation will fall on deaf ears.

In the case of Foster's Group, which announced a demerger of its beer and wine businesses after putting up the white flag on a combined strategy, its boss Ian Johnston stands to reap a termination payout of between $2 million and $3 million, including short and long-term bonuses, according to the company.  

Johnston received $2.7 million in base salary plus bonuses last year.  

There have been other outrageous termination packages paid by boards to departing CEOs recently. Geoff Knox at Downer EDI left with a termination package worth more than $4 million shortly after revealing a shock $150 million provision for its Waratah rail project. Mark McInnes received a $1.5 million payment from David Jones in the wake of a sexual harassment complaint.    

Or there's River City, which collapsed last week owing $1.3 billion, yet paid its chief executive, Flan Cleary, bonuses last year, almost doubling his total remuneration to $830,793.  

But the most outlandish has to be building and plumbing supplies company Crane Group, which sits outside the top 100 companies. It faced its fourth backlash from shareholders in as many years over executive pay and now reveals that if Fletcher Building is successful in a takeover bid for Crane, the top two executives - managing director Greg Sedgwick and financial director Mark Fitzgerald - will walk away with a combined $17 million, which is equivalent to more than half of what the company paid in profits last year and just shy of the company's half-year profit of $18 million. Chairman Leo Tutt is also chairman of the remuneration committee.  

Another eyebrow raiser was the sudden decision by Coffey International CEO Roger Olds, on February 9, to quit to "spend more time with my wife, three children and two grandchildren". A week later the company reported an interim loss of $4.9 million.  

Olds is entitled to a termination package of 18 months' salary or $1.2 million, plus long-term incentives. This is equivalent to almost 10 per cent of last year's profit.   

Despite such shenanigans, a director of a top 300 company, who allows such things to happen, seeking re-election can expect an average 90 per cent of investors to vote in their favour.

Before the financial crisis it was 97 per cent. This says more about the passivity of the super funds than their support for the incumbents.

This shows that directors would need to find hen's teeth before they would be subject to board spills under Labor's proposed two-strikes rule.

The rule is, if 25 per cent of shareholders vote against a company's remuneration report in two successive years, a further vote, requiring a 50 per majority, would be held to spill the entire board.

In the latest reporting season, an estimated 12 boards in the ASX top 100, including Asciano, Transurban, Challenger and Downer EDI had more than 25 per cent of shareholders voting against the remuneration report. For three of them it was the second year in a row.

If the federal government were serious about clamping down on executive pay, it would have followed the lead of the United States and made it mandatory for

all institutional investors to disclose how they vote on remuneration reports and other related issues.

All I read was blah blah blah I hate CEO's.

Another threat, another whinge.

Verge wrote on Feb 28^th, 2011 at 3:30pm:



If these sooks spent the effort that they invest in crying about being failures, they`d possibly be successful.

qikvtec wrote on Feb 28^th, 2011 at 8:25pm:




lol...