A century of executives in the $1m club

WESFARMERS is the bluest of blue-chip Perth companies. Automotive Holdings Group is a very successful, soundly run national business, and Atlas Iron recently commissioned its first mining project.

But all of this seems to have counted for very little when directors of these companies faced the ire of shareholders at their annual meetings last month.

Wesfarmers, AHG and Atlas Iron directors faced the indignity of seeing a majority of shareholders vote against acceptance of their remuneration reports.

Their only consolation was that they were not alone.

Some of Australia's best-known companies, including Qantas, Boral and Transurban have faced big protest votes from their shareholders.

Now, after months of plunging stock markets, asking shareholders to approve remuneration packages for the year to June 2008 - when the boom was still under way - seems to be asking for trouble.

The vote on remuneration reports is non-binding but does send a signal to the board of directors.

More significant for some companies is that shareholders have rejected share option packages proposed by their boards.

AHG shareholders, for instance, voted last week against the granting of 196,280 share rights to managing director Bronte Howson.

The board of Atlas Iron, which lost its chairman in a shock annual meeting, saw the writing on the wall and withdrew a proposal to issue options to managing director David Flanagan.

A raft of smaller companies has taken pre-emptive action. Moly Mines, Catalyst, Breakaway Resources and Universal Resources have all announced plans to either freeze directors' fees or withdraw share option schemes.

As significant as these developments are, they follow a year when directors and chief executives of many Perth companies were richly rewarded for their efforts.

WA Business News' annual salary review has identified nearly 100 directors and executives whose total remuneration topped $1 million last financial year - up from 79 the previous year.

For many executives, their remuneration includes a base salary, superannuation and reimbursement of expenses, plus an annual cash bonus that can be 100 per cent or more of their base salary, and share options.

The annual salary review is topped nearly every year by directors of mineral exploration companies who have been granted a swag of share options.

Andrew Forrest, who is best known as chief executive of iron ore miner Fortescue Metals Group but is also non-executive chairman of Poseidon Nickel, heads this year's group.

In that capacity, he was granted 115 million Poseidon options and 5 million Poseidon shares in a deal valued by the company at $235 million.

As discussed on page 19, the value of share options can fluctuate widely. The value of Mr Forrest's Poseidon options currently would be a fraction of their reported value, following the collapse in both the nickel price and Poseidon's share price

Nonetheless, based on data published in last year's annual report, Mr Forrest's total remuneration put him ahead of all other company directors in WA.

Other directors who were granted particularly large options packages last year included Greenland Minerals and Energy managing director Rod McIllree ($11.3 million), Aquila Resources executive chairman Tony Poli ($5.6 million), Australasian Resources non-executive chairman Luke Martino ($5.7 million) and managing director Andrew Caruso ($2.4 million), and Range Resources non-executive chairman Sam Jonah ($4.7 million).

Turning the analysis to salary payments, it becomes clear that big companies tend to pay the biggest salaries.

Wesfarmers managing director Richard Goyder earned a base salary of $3.3 million last financial year, and recently received a 5 per cent pay rise.

His Woodside counterpart Don Voelte earned a base salary of $2.3 million.

Those figures put them well ahead of all other chief executives in WA.

They are followed by a diverse group of eight executives that earned a base salary of more than $1 million per year.

This includes four resources company chief executives.

Minara Resources' Peter Johnston is paid $1.6 million - a figure that says more about the experience and skill he brought to the job than the financial performance of Minara, which has been battered by plunging nickel prices.

Rio Tinto Iron Ore's Sam Walsh, uranium miner Paladin Energy's John Borshoff and mineral sands producer Iluka Resources' David Robb also received base salaries in excess of $1 million.

Engineering and contracting companies Clough, NRW Holdings, Macmahon Holdings and Emeco Holdings also paid their chief executives annual salaries of more than $1 million. This practice contrasts with several consistently profitable 'top 20' WA companies that are much more modest with their salary levels.

Education services provider Navitas managing director Rod Jones - who was named Australia's entrepreneur of the year last week - has an annual salary of $650,000.

Engineering and construction contractor Monadelphous pays its chief executive Rob Velletri $536,000 a year - and that is after a big increase on his previous salary.

Land developer Peet pays its new chief executive Brendan Gore an annual salary of $504,000.

The analysis gets more interesting when annual bonuses are added into the mix.

Woodside's Don Voelte earned the largest annual bonus last financial year, of $1.59 million.

He was followed by Wesfarmers finance director Gene Tilbrook, who earned a bonus of $1.3 million on top of his $2 million salary package.

Close behind was not one but five directors of stockbroking company Euroz, who were paid annual bonuses last year of $1.3 million.

In their case, the bonus was on top of an annual salary of a relatively modest $250,000.

Wesfarmers boss Richard Goyder was until recently in the unusual position of not being eligible for an annual bonus.

The company's board had concluded that its chief executive should focus on long-term performance and therefore should be limited to long-term incentives.

However it had a change of heart this year, in light of the "increased responsibilities the Coles Group acquisition has brought to the role, and following an independent review".

Under the new arrangements, Mr Goyder can earn up to 100 per cent of his fixed remuneration as an annual bonus if performance targets are reached, and up to 120 per cent if targets are exceeded.

The annual bonus is based on several key outcomes, including overall group performance, progress with the Coles turnaround, and workplace safety performance.

Mr Goyder intends to salary sacrifice his annual bonus into Wesfarmers shares.

The long-term incentive scheme for Mr Goyder is based on the company's return on equity target, and will be determined by reference to the amount the company's sustainable ROE exceeds long-term expectations.

The company said the long term incentive is designed to reward "exceptional performance only" but this did not satisfy investor activists who opposed the deal because it did not disclose the key ROE targets.

Outgoing Wesfarmers chairman Trevor Eastwood told the company's recent annual meeting that the market sensitive ROE information could not be released.

He noted that Wesfarmers is Australia's 15th largest company by market value yet Mr Goyder's remuneration ranks him at number 48 among Australian company directors.