The senior executive team at Wesfarmers has agreed to a salary freeze for two years and will forego individual bonuses potentially worth a collective $4.5 million.
The senior executive team at Wesfarmers has agreed to a salary freeze for two years and will forego individual bonuses potentially worth a collective $4.5 million.
The company is the latest in a string of major businesses to implement a salary freeze due to the global slowdown, with Woodside Petroleum announcing its wage freeze earlier this month.
In a memo to staff circulated today, managing director Richard Goyder said it was the "responsible" course to take in light of the current economic climate.
However he emphasised the overall group "continues to travel well given the economic conditions, with solid performances across a number of our Divisions".
The salary freeze and halt to bonus payments affect around 15 executives within Wesfarmers, including Mr Goyder, managing directors in the group's nine divisions and several senior directors.
Under the agreement, the base salary of the senior executive team and directors fees will be kept at October 2008 levels until a review in October 2010.
Individual bonuses will also be scrapped until the October 2010 review, with some executives to miss out on payments potentially worth between $130,000 and $500,000 each.
Mr Goyder's bonus payment could have reached up to $1.5 million this year, or 40 per cent of his base salary, depending on his performance.
However, the senior executive team will still be up for financial performance bonuses.
"I believe the decision to freeze salaries at 2008 levels for the group's most senior executive managers, as well as not pay the individual discretionary component of their annual bonuses this year, is a responsible one given the current economic climate," Mr Goyder said.
Shareholders voted down the company's remuneration report at its annual general meeting in November but this was a hollow victory given the resolution was non-binding.
Wesfarmers has also joined the chorus of companies speaking out against the federal government's proposed crackdown on employee share schemes.
Mr Goyder on Friday confirmed reports this week that the company had put its employee share scheme on hold.
"Wesfarmers has put on hold plans for its employee share schemes until there is greater clarity on what these changes mean for the schemes and our employees," he said.
"The government's decision was unexpected.
"These times are challenging enough for many of our valued employees and I am very disappointed with the government's current position on employee share schemes.
"We will ensure we make strong representations on this issue to the government."
Mr Goyder said Wesfarmers had planned for about 110,000 of its employees to take part in employee share schemes this year.
Shares in Wesfarmers were down 56 cents at $20.81.
Wesfarmers' memo to employees is below:
Dear Employees,
I would like to let you know that the Wesfarmers Board and senior management have made a decision to freeze their salaries and reduce annual bonuses.
This applies to me and the Managing Directors of the Group's nine divisions, as well as several of my senior direct reports at head office.
Annual fees of Wesfarmers' Board of Directors have been frozen at 2008 levels.
I want to emphasise that the Group overall continues to travel relatively well given the economic conditions, with solid performances across a number of our Divisions.
However, I believe the decision to freeze salaries at 2008 levels for the Group's most senior executive managers, as well as not pay the individual discretionary component of their annual bonuses this year, is a responsible one given the current economic climate.
I also want to highlight a recent Australian Government announcement that fundamentally impacts the Group's employee share schemes.
We offer shares to many of our employees as a way of providing ownership in Wesfarmers, and for some, as part of their remuneration package. We had planned for approximately 110,000 Wesfarmers' employees to have the opportunity to participate in the company's share schemes this year.
As a result of the announcement, Wesfarmers has put on hold plans for its employee share schemes until there is greater clarity on what these changes mean for the schemes and our employees.
The Government's decision was unexpected. These times are challenging enough for many of our valued employees, and I am very disappointed with the Government's current position on employee share schemes.
We will ensure we make strong representations on this issue to the Government and keep you updated on its impact.
