A question at the AGM to Kevin.. Did you or your family pay back the FBT(Fringe benefits tax) paid by the company on your or your family's behalf? Also where in your remuneration package does it include free flights for your extended family? Greed!! Pure and simple..
If a CEO’s family gets to fly for free on the corporate private jet, is that worth anything to the CEO?We’d have thought: obviously, as said CEO is saving the money he or she would otherwise spend on airfares. But Santos disagrees.This column revealed in September last year that the Adelaide-based oil and gas giant had set aside $US3.3 million to lease a 10-seater 2017 Dassault Falcon for the exclusive use of the board and executive team, the cost offset by allowing other companies to charter the jet when it isn’t in use.Santos CEO Kevin Gallagher: high flyer. Ben SearcyFor Australia, this is highly unorthodox. Even the CEOs of Rio Tinto and BHP slum it in charters also used by their broader remote workforces. And Santos’ lease was never disclosed to investors, who had to read it here.We also revealed that CEO Kevin Gallagher’s family had on five occasions in 2023 (and two in 2022) accompanied him on the corporate jet. The company justified this by saying they just tagged along on trips the jet was making anyway, resulting in no “additional cost to the company as all trips were domestic and business-related” (so clearly family didn’t accompany Gallagher on his UK investor roadshow, when he took the jet to Edinburgh ahead of a Scotland v Ireland rugby match he attended). Though, when it comes to the CEO’s disclosed compensation, that’s hardly the point. On page 62 of its recently released annual report, Santos notes some $US6770 in “other” allowances and non-monetary ad hoc payments that accrued to Gallagher, on top of his $US1.3 million salary, and $US3.3 million in bonuses.Australian listed companies that pay for executives’ families to fly on commercial airlines often disclose the value of such flights (plus the associated taxes paid) as remuneration. But Santos’ $US6770 “other” figure barely seems enough to cover five family trips in what must be the equivalent of domestic business class.Sure enough, as Santos told us, it doesn’t. Santos also confirmed there were no other family tag-alongs in FY23, or any so far in FY24, in a marvellous demonstration of what happens when a company knows it’s going to be asked about something.But that still leaves the now-historic travel of Gallagher’s family on the executive jet, in the period covered by the most recent annual report.Companies that provide their staff with perks of monetary benefit are required to pay fringe benefits tax on these transactions, to the tune of a hefty 47 per cent of the gross value. Surely Santos has shared the value of the family flights with the ATO, even if providing it to shareholders is a bridge too far.But why hadn’t Santos counted the value of the flights as part of Gallagher’s pay? We asked, and were merely told the company “complies with all laws relating to disclosure and transparency of the CEO’s remuneration, including fringe benefits assessment and taxation, and will continue to do so”.However justified, in the United States, this just wouldn’t fly.After Jack Welch’s spectacularly combustible 2004 divorce laid bare the many perks he’d been getting at GE, the US Securities and Exchange Commission cracked down on what was dubbed “stealth compensation”. In the wash-up, companies listed in the United States today make granular disclosure of executive perks, including personal travel on company aircraft. “Personal travel”, in this regime, doesn’t include trips for business purposes, but does include the benefit to family members who accompany executives on said business trips, which is precisely the situation we’re pondering here.This feeds through to some Australian companies. Consider the dual-listed ResMed, whose proxy statements clearly list the monetary benefit of CEO Mick Farrell’s personal use of the corporate jet. The $US135,001 total figure in FY22 doesn’t include his travel for work, but does include the cost of his wife joining him on such trips, in a complex calculation that excludes fixed costs but does consider the prices of fuel, maintenance, weather monitoring, on-board catering, fees and taxes.The fact that ResMed would fly the plane anyway is neither here nor there. Because if the CEO’s family tagging along isn’t a perk of monetary value, what is?
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