02/12/2010 - 00:00

Value in the eye of shareholders

02/12/2010 - 00:00


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GETTING value for money is a subjective matter when it comes to assessing executive pay.

Value in the eye of shareholders

GETTING value for money is a subjective matter when it comes to assessing executive pay.

For while local business giants Woodside Petroleum, Wesfarmers and Rio Tinto all had starkly different years in terms of strict financial performance, few major investors would question the presence of their respective chiefs top the state’s annual pay scales.

Yet it is worthwhile comparing their annual pay packets with those of the executives who delivered the best returns to their investors over the year.

Earlier this year, WA Business News’ annual survey of shareholder returns found that, of the state’s 100 largest companies, not one of Western Australia’s best-known businesses ranked among the top 10 for returns to investors.

Instead, all but one of the state’s top 10 performers could be classified as relatively speculative explorers or aspiring miners.

The best performer of WA’s 100 largest companies last financial year, with a spectacular total shareholder return for the year of 740 per cent, was Canada-focused coal miner Coalspur Mines.

Chaired by WA mining entrepreneur Ian Middlemas and previously known as Xenolith, the company was rebranded after acquiring a swag of advanced coal leases in Canada’s Alberta Province, which in turn led to its market value soaring to $303 million by the end of June.

Since then, its stellar run has continued, pushing its market worth to almost $750 million by the start of this month.

On that basis, shareholders are unlikely to quibble much over the $3.55 million paid to managing director Eugene Wusaty last financial year – making him WA’s 10th best-paid company chief.

Yet shareholders in US-focused gas explorer Aurora Oil & Gas could lay claim to even better value for money from their chief executive, Jonathan Stewart. Aurora ranked second in WA Business News’ shareholder returns survey this year, with a one-year return of 516 per cent, as investors clamoured for exposure to America’s booming shale gas sector.

Yet Mr Stewart ranked only 356th in the executive pay scales with a total package worth just $384,818.

West African gold plays Ampella Mining and Perseus Mining also enjoyed stellar returns in 2009-10, yet there was a vast gulf between the pay of their respective chief executives, with Ampella chief Paul Kitto collecting more than $2.01 million and Perseus boss Mark Calderwood pocketing a relatively modest $395,000.

Aside from Messrs Wusaty and Kitto, the only other million-dollar pay packet awarded to the head of a top 10 performing company went to Forge Group boss Peter Hutchinson, who collected just over $1.1 million as the engineering and construction contractor generated a one-year return of 507 per cent.

The chiefs of the five remaining top 10 performing stocks – Sandfire Resources, Giralia Resources, Gryphon Minerals, Kingrose Mining and Silver Lake Resources – also delivered good value for money with packages ranging between $150,000 and $670,000.

At the other end of the scale, the $4.2 million paid to Macmahon Holdings chief Nick Bowen attracted a 40 per cent ‘no’ vote at the contractor’s annual meeting last week, following a year in which it posted a negative one-year return of 63.6 per cent.

Mr Bowen’s remuneration package was sufficient to make him WA’s ninth best paid public company chief executive in 2009-10.

Pay levels have been a perennial issue for shareholders of the struggling civil and mining contractor, but were particularly indigestible to shareholders last week in the wake of yet another profit downgrade due to losses on a major Pilbara rail contract.

But Mr Bowen pointed to a brighter future ahead, with Macmahon expecting to overtake the $590 million in construction contracts it won in 2009-10 in the near future.


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