05/12/2013 - 11:23

Pay renegotiation pressure point

05/12/2013 - 11:23

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FEATURE: Salaries have come under huge pressure during the past year as widespread cost cutting takes its toll on executives’ take-home pay.

Pay renegotiation pressure point
VDM Group’s Dongyi Hua received a base pay nearly $200,000 less than the company’s previous chief executive. Photo: Attila Csaszar

Salaries have come under huge pressure during the past year as widespread cost cutting takes its toll on executives’ take-home pay.

Executive salary cuts 2013 

-10%  John Borshoff (Paladin Energy)  $1,380,240
-15%  Jeff Quartermaine (Perseus Mining)  $722,500
-23% Troy Hayden (Tap Oil)  $500,000
-3% Raleigh Finlayson (Saracen Minerals)  $485,000
-20% Paul Kitto (Ampella Mining)  $450,757
-25% Paul Benson (Troy Resources)  $405,000
-20% Steve Parsons (Gryphon Minerals)  $400,000
-10% Marcus Flis (Royal Resources)  $360,012 
-30% Chris Reed (Reed Resources) $295,000
-37% Nick Di Latte (Diploma Group)  $295,000  
-40% Stuart Pether (Kula Gold)  $213,000
-50% Tony Lofthouse (Thundelarra)   $150,000

 

A quick look at the salaries of chief executives who renegotiated their salaries in Western Australia in 2013 clearly reveals the challenges of the past year.

Widespread belt-tightening across WA’s resources sector put pressure on remuneration reports, with executives’ salaries the first thing on the chopping block for companies seeking to cut costs.

Business News research found 13 out of the 16 chief executives to renegotiate their base salary over the past 12 months were forced to take pay cuts – some as high as 50 per cent.

One of the higher-profile executives to have their salary slashed was Paladin Energy boss John Borshoff.

The uranium miner announced midway through last month that Mr Borshoff had negotiated a one-year extension to his contract, but his pay was reduced 32.5 per cent to $1.38 million.

Mr Borshoff has twice taken pay cuts in recent years – a 10 per cent cut in October to his current pay level, and a 25 per cent cut in December 2011, which took his base salary down to $1.53 million, from $2.04 million.

Despite the cuts, Mr Borshoff remains one of the state’s top-paid executives, ranked 13th on the Business News list, with options, bonuses and superannuation taking his total remuneration north of $2.5 million.

The depressed state of the uranium market was similar to that experienced in the gold sector.

With the price of spot gold trading under or around $US1,300 for much of the second half of the year, WA gold producers were on the frontline of reining in costs, with directors’ salaries an easy target.

Troy Resources chief executive Paul Benson took a 25 per cent pay cut, taking his base salary down to $405,000, while Reed Resources boss Chris Reed’s pay was lowered by 30 per cent, to $295,000.

Junior gold exploration firms Kula Gold and Ampella Mining also took the knife to their respective CEO’s salaries, with the base pay of Kula’s Stuart Pether reduced by 40 per cent, to $213,000, while Ampella’s Paul Kitto saw his pay reduced by 20 per cent to $405,000.

Fellow junior explorers Saracen Minerals and Gryphon Minerals were not immune to the cost cutting, with bosses Raleigh Finlayson and Steve Parsons taking 3 per cent and 20 per cent pay cuts, respectively.

Mr Parsons also gave up a $650,000 bonus payment.

Gold producer Perseus Mining implemented a raft of cost-cutting measures in an effort to reduce its overheads by 15 per cent.

Managing director Jeff Quartermaine’s salary was reduced to $722,500 as a result, while any bonuses Mr Quartermaine had been eligible for were frozen.

Perseus said in September the initiatives were having the desired effect, reporting it would meet its gold production guidance as well as flagging improved performance in coming months.

Elsewhere in the resources sector, Tap Oil’s Troy Hayden also took a hefty hit, with his base pay being cut by 23 per cent and rights to a short-term bonus waived.

Mr Hayden’s new salary is $500,000.

The largest pay cuts by percentage, however, were those taken by Thundelarra boss Tony Lofthouse and Queste Communications chief Farooq Khan, who both received 50 per cent reductions in base pay.

Mr Lofthouse’s new salary was $150,000, while Mr Khan’s dropped to $68,000.

The pain wasn’t completely restricted to the resources sector, with Diploma Group’s Nick Di Latte copping a 37 per cent hit to his salary, down to $295,000.

New faces, mixed bag

It was a similar story for new appointments, as research by Business News found just four out of 14 appointees earning more than $400,000 as base salary received packages higher than the executive who preceded them.

One of the chief executives to flip the script on the trend of falling pay was new Pluton Resources boss Brett Clark, who received a base salary about $25,000 higher than predecessor Anthony Schoer.

Noble Mineral Resources also appointed a new chief who was more expensive than the man he replaced, with Craig Dawson’s base remuneration exceeding that of Wayne Norris by just less than $70,000.

In June, Brumby Resources chairman Geoff Jones was appointed the successor to Joe Ricciardo at GR Engineering Services on a base pay rate that was more than $120,000 higher than Mr Ricciardo, who transitioned to chair the company’s board.

Former Galaxy Resources managing director Iggy Tan stepped down from the lithium miner in June, only to resurface at junior explorer Kogi Iron two months later.

Mr Tan’s base pay is $490,385, nearly $190,000 more than Kogi’s executive director Kevin Joseph.

Mining services

Remuneration moves in the mining services sector, however, were less rosy.

Calibre Group announced last week that Peter Reichler would take over from Rod Baxter, on a base salary $450,000 lower than what Mr Baxter received.

Emeco Holdings’ new boss, Ken Lewsey, received a base salary package worth about $70,000 less than previous chief Keith Gordon, while VDM Group’s Dongyi Hua received a base pay nearly $200,000 less than the company’s previous chief, Andrew Broad.

Producing miners also got among the salary slashing, with iron ore miner Gindalbie Metals’ newly installed chief executive, Dale Harris, receiving a base salary of $600,000, $513,000 less than the man he replaced, Tim Netscher.

Former Sundance Resources chief financial officer Peter Canterbury took the helm of Bauxite Resources in February, with his $450,000 base pay $20,000 less than that of previous boss Scott Donaldson.

Outside the resources sector, property developer and funds manager Aspen Group also appointed a new chief executive at lower than his predecessor’s base salary, with new boss Clem Salwin earning about $146,000 less than interim chief Hugh Martin.

At point-of-sale financing firm ThinkSmart, new chief executive Keith Jones took $116,515 less than the previous chief, Ned Montarello.

Bucking the trend

For executives in Kerry Stokes-associated companies, however, 2013 wasn’t so bad.

New appointees Don Voelte and Tim Worner received base salary packages that exceeded those of their predecessors, taking the reins at Stokes companies Seven Group Holdings and Seven West Media, respectively.

Mr Voelte’s base pay of $3.2 million was about $200,000 higher than former Seven Group chief Peter Gammel’s base salary, while Mr Worner received around $170,000 more than Mr Voelte did as chief of Seven West.

Iron Ore Holdings boss Alwyn Vorster also did well, receiving a 13 per cent pay rise to take his base salary up to $535,000.

Also bucking the pay-cutting trend was OTOC’s Adam Lamond, who was awarded a 29 per cent salary increase to $485,000.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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