05/12/2013 - 10:47

Investors cut CEOs some slack

05/12/2013 - 10:47

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FEATURE: It has been a difficult year for many of WA’s listed entities, but investors are backing the performance of most of the state’s top executives.

Investors cut CEOs some slack
Education provider Navitas’s chief executive, Rod Jones, was another executive to provide solid value for shareholders. Photo: Attila Csaszar

It has been a difficult year for many of WA’s listed entities, but investors are backing the performance of most of the state’s top executives.

Highest-paid WA executives (total remuneration)

  1. Richard Goyder (Wesfarmers) $8,593,954
  2. Peter Meurs (Fortescue Metals Group) $8,145,544
  3. Peter Coleman (Woodside Petroleum) $7,297,198
  4. Peter Toth (OM Holdings) $6,002,000
  5. Mark Bennett (Sirius Resources) $5,984,652
  6. David Robb (Iluka Resources) $5,306,775
  7. Terry Bowen (Wesfarmers) $4,450,751
  8. Neville Power (Fortescue Metals Group) $3,970,063
  9. Jeff Foster (Sirius Resources) $3,927,695
  10. David Simpson (Forge Group$2,905,998

 

Sixty-eight of the 104 ASX-listed companies that employ Western Australia’s top 150 highest-paid executives failed to provide a positive return to investors in the past financial year.

Numbers like those indicate it has been pretty tough going across all sectors of WA industry, from resources to IT, to retail and property development.

However, of those companies whose share price trended negatively over the past 12 months, only nine bore the brunt of angry investors’ strikes against remuneration packages at their respective annual meetings.

Under rules introduced in 2011, a company receives a strike against its remuneration package if more than 25 per cent of shareholders vote against it.

If a company reaches two strikes, a resolution to spill the board of directors is automatically triggered.

The most emphatic of the strikes this year was lodged against biotechnology firm Avita Medical, which received a 75 per cent ‘no’ vote against its remuneration report at its annual meeting last month, resulting in high-profile chairman Dalton Gooding stepping down from the company’s board.

Avita chief executive William Dolphin ranked just outside the Business News top 150 earners, with total remuneration of $552,000, including a cash bonus of $103,000.

Considering Avita lodged a $7.9 million loss in FY2013, shareholders clearly believe Mr Dolphin’s pay package is too generous.

And they may have a point, considering the company’s share price has fallen by 30 per cent during the past 12 months, and 41 per cent since hitting a high of 15.5 cents in February.

Another company that received a categorical rejection of its executive pay level was information technology firm ASG Group.

About 45 per cent of ASG shareholders voted against the company’s remuneration report at its annual meeting last month.

ASG chief executive Geoff Lewis’s $1.2 million salary makes him the 57th highest paid executive in WA, but the company reported a $29 million net loss for FY13 in August, contributing to a 34 per cent fall in the value of the company’s shares over the past year.

Two companies with executives ranked in the Business News top 11 earners for 2013 that attracted strikes against management pay levels were mining services company Forge Group and car dealer network Automotive Holdings Group.

Forge Group managing director David Simpson, ranked 9th with a total remuneration package of $2.91 million, oversaw the company’s rapid expansion during a period where most of its contemporaries were struggling to achieve growth.

The company reported earlier this year that its order book totalled $1.3 billion, adding a $1.47 billion Roy Hill contract to that in recent months.

But the Forge’s success unravelled after it ran into problems on two of its major contracts, resulting in a $127 million one-off write-down for the 2014 financial year.

At Forge’s annual meeting at the end of October, 40 per cent of its stockholders voted against Mr Simpson’s remuneration package, while investors also savaged Forge on its return to trading last week, wiping around 83 per cent off its value.

AHG, on the other hand, said it was taken by surprise by its ‘no’ vote, after 38 per cent of its shareholders rejected its remuneration package.

The car dealer lodged a net profit of $72.7 million in FY13, up 13 per cent on the previous year.

AHG’s earnings per share also rose 13 per cent, to 27.9 cents.

The ‘no’ vote, however, marked the second time AHG has received a strike, following its first strike in 2011.

Because the strikes were not received in consecutive years, however, AHG was not required to canvass shareholders regarding a potential board spill.

AHG boss Bronte Howson’s total remuneration of $2.9 million ranked him 11th among the state’s top-paid executives.

This year’s strike was understood to have stemmed from issues with one of its major shareholders and competitors, Brisbane-based AP Eagers.

AHG has resisted granting a seat on its board to a representative of AP Eagers, claiming it would create a conflict of interest.

Two WA-headquartered companies received second strikes against executive pay levels in 2013 – payday lender and pawnshop Cash Converters and sandalwood producer TFS Corporation.

Despite the second strikes, however, both companies’ boards of directors were spared the axe.

Changing the game

Other leading WA companies, such as mining services group Macmahon Holdings, residential developer Peet, construction and development firm Diploma Group, and shipbuilder Austal sought to appease shareholders by changing the structure of their respective remuneration plans to a more performance-based model.

Macmahon wrote to shareholders midway through October, ahead of the company’s AGM, urging them to accept changes to its remuneration report.

The changes included reductions to the pay of chief executive Ross Carroll, in comparison to former boss Nick Bowen, and other members of its executive team, as well as a permanent reduction in fees paid to board members.

Mr Carroll was the 36th highest-paid WA executive in 2013, with a total remuneration package of $1.5 million.

Peet managing director Brendan Gore voluntarily agreed to maintain his base pay for the current financial year, despite being contractually entitled to an increase at least at the rate of inflation.

Mr Gore and his executive team also gave up FY13 bonuses, despite meeting non-financial key performance indicators.

Peet chairman Tony Lennon told the company’s annual meeting last week that the remuneration scheme had been determined in the context of the most challenging property markets in decades.

Mr Gore’s $1.7 million remuneration package placed him 27th on the Business News list.

Diploma unveiled changes to its remuneration structure late last month, with managing director Nick Di Latte accepting an $180,000 reduction to his base pay.

Mr Di Latte’s package also included a short-term, cash-based incentive package linked to current year earnings targets.

Shipbuilder Austal also put in place an incentive scheme that closely tied chief executive Andrew Bellamy’s pay levels to specific and transparent performance measures.

Mr Bellamy’s pay package included a base salary of $750,405, with the remaining $325,000 made up of long-term and other performance-based bonuses.

Value adding

On the other side of the equation, and despite the falling returns, it would seem shareholders believe the majority of WA’s top paid executives are providing good value.

The state’s highest paid executive was again Wesfarmers managing director Richard Goyder, whose salary and bonuses totalled more than $8.5 million.

The company’s finance officer, Terry Bowen, was also ranked in the top 10, with a total pay package of $4.45 million.

Wesfarmers produced $59.8 billion in revenue over the year, while its stock increased in value by 20 per cent, from around $34.00 in December last year to trade at $42.58 earlier this week.

Among those companies providing the largest returns to investors was exploration firm Sirius Resources.

During March, Sirius shares were trading around $5.00, as the company’s exploration success at its Bollinger nickel deposit near Norseman sparked massive investor interest.

The shares have come off that high point, trading around $2.00 earlier this week.

Sirius Resources managing director Mark Bennett’s total remuneration package of $5.98 million placed him in the top five highest-paid WA executives, but his base salary was just $719,652.

The vast bulk of Mr Bennett’s total pay packet, which reflected recent trends in executive pay, was $5.26 million in long-term incentives.

Also benefiting from a large performance-based incentives package was Sirius non-executive director Terry Grammer, whose base salary was just $52,683.

Mr Grammer’s $2.6 million incentives package placed his total remuneration at 12th on the Business News executive pay list.

Education provider Navitas’s chief executive, Rod Jones, was another executive to provide solid value for shareholders.

Despite continued pressure on the education sector from the persistently high Australian dollar, Navitas produced a modest 2 per cent increase in net profit to $74.6 million.

The company’s shares, however, grew in value by 33 per cent during the past 12 months to trade at $5.99 earlier this week.

Mr Jones ranked 80th among WA executives for his remuneration package, which comprised a base salary of $758,628 and an annual bonus of $247,653, as well as around $33,000 in superannuation and other incentives.

A pair of information technology players, Michael Malone and Clive Stein, also ranked among the best value chief executives in 2013.

Mr Malone led iiNet to a net profit of $60.9 million, a 64 per cent increase on the previous year.

The internet service provider’s shares rose from $4.25 in December last year to $6.13 earlier this week, while Mr Malone’s remuneration package of $1.79 million made him the 23rd highest paid WA chief executive.

Mr Malone announced in November that he would take a three to six-month break from the business, with chief financial officer David Buckingham to take the helm of the company in his absence.

Mr Stein’s Amcom Telecommunications produced similarly impressive results, with its share price rising 36 per cent over the 12 months to December 3.

Amcom produced a 23 per cent increase in net profit in FY2013, resulting in a 22 per cent increase in earnings per share to 8.3 cents.

Mr Stein, however, was ranked 105th for total remuneration, earning $917,986.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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