Shareholders urged to revolt over huge executive bonuses
Scott Rochfort October 29, 2008
THE unease over huge bonuses being heaped on senior executives of several poorly performing listed companies looks set to escalate into a full-blown shareholder revolt after Transurban became the latest to see its remuneration report voted down at its annual meeting.
Boral failed to gain support of its remuneration report by a vote of shareholders last week, and Transurban said yesterday that it had failed to get a majority of its shareholders to endorse payment of $15 million in bonuses and termination payments for its former chief executive Kim Edwards.
With the Mr Edwards's departure being followed by a decision by Transurban to slash future distributions and issue new shares in order to reduce debt, shareholders had a chance on Monday night to vent their fury. However, Mr Edwards will keep his benefits, which include a $5 million "strategic milestone" payment, because the vote was non-binding. The struggling financial group Suncorp Metway also suffered a stinging rebuke at its annual meeting in Brisbane, with a show of hands voting down its remuneration report. It contained a base pay rise, a $1.2 million cash bonus and $2.8 million in shares for its embattled chief executive, John Mulcahy. However, the resolution was carried when all the institutional votes came in, albeit with a large no vote.
The struggling Valad Property Group is set to face a similar backlash in Sydney tomorrow.
The corporate governance advisory firm RiskMetrics Group, which recommended a no vote against the Boral and Transurban remuneration reports, has urged institutional shareholders to follow suit against Valad.
"They are voting against executive rewards that are clearly defying gravity," said Dean Paatsch, of RiskMetrics. RiskMetrics has raised objections that Valad, whose shares have fallen from $1.94 to 9c in the past year, continues to pay generous bonuses, salaries and termination payments for executives. The executive chairman Stephen Day had a 58 per cent rise in fixed pay to $926,000, $1.1 million in options and a $743,000 bonus even though Valad reported a $248 million loss in the year.
RiskMetrics has raised concern over loopholes that allow company boards to award huge payments without shareholder approval. A company only needs to put a termination payment to a shareholder vote when it is seven times an executive's base salary.
The Australian Shareholders Association has urged its shareholders to vote against the remuneration reports of several companies this annual meeting season, including Wesfarmers, B&B Infrastructure, B&B Power, Tatts Group, Fairfax Media, Ramsay Healthcare, Paladin and Australian Wealth Management.
The chief executive of the association, Stuart Wilson, said: "During the good years there was a mantra from company boards that companies were paying good money because they were performing well. It has only been now that these motherhood statements have been undone."
