How to spot a bargain chief executive

IF you measure the value of a chief executive by the salary he or she takes and compare it to what heads of similar size companies receive, Andrew Forrest would come out on top in Western Australia year in, year out.

The Fortescue Metals Group founder accepts a remuneration package of just less than $200,000 for his role in heading the $12.4 billion iron ore company, which is about the pay rate the boss of a small listed company would expect to receive.

But with more than $4 billion tied up in company stock, few would argue he does not have incentive to do a good job.

Using this measure, you would have to seek out the salary averse James Packer in order to beat Mr Forrest.

Company founders take very different approaches to pay packages. Westfield founder Frank Lowy sits at the other end of the spectrum with his $16 million-plus annual salary (or more than $300,000 a week).

Closer to home, Paladin Energy founder John Borshoff is not shy about taking home a good wage, with a $5.7 million annual pay packet; although he does run a $2.8 billion uranium production company.

Peter Harold of nickel sulphide producer Panoramic Resources and Gavin Hawkins and Angelo Del Borrello of property manager Aspen Group also receive very healthy pay slips for sub $500 million companies.

Using a different measure, whereby chief executives are measured in relation to stock price performance, it would be hard to go past Rod Jones at Navitas.

The founder of the $1.4 billion Mount Pleasant-based education provider, who has a $1.4 million salary, has presided over a company that has bucked the share market trend and more than doubled its share price in the past volatile three years.

While there are a few high-profile founding chief executives, the majority of companies are run by executives brought in for their intellectual capital.

If the executives don’t meet shareholder expectations, salaries and termination payouts come under intense spotlight.

More than 42 per cent of votes were lodged against the remuneration report at the recent annual general meeting of Qantas in Perth.

The protest vote, which would have led to a board spill if the Productivity Commission’s proposed two-strikes rule was in place (see story on page 11), was largely aimed at a contentious $10.7 million payout to former chief executive Geoff Dixon. Qantas shareholders have watched their stock halve in value during the past two years.

Yet there have been larger payouts during the past couple of years that have attracted widespread criticism.

Corporate governance group RiskMetrics lists John Ellice Flint, who left Santos with a $16.8 million golden handshake, and Consolidated Media’s former chief John Alexander ($15 million payout) as having received the highest termination payouts in recent years.

Sol Trujillo’s multi-million dollar “exit payment” from Telstra also received considerable criticism, magnified by company woes during his reign.

The Australian Shareholders’ Association noted that the payment was excessive but blamed the payout on the drafting of his contract five years earlier.