Copernicus, you may recall, discovered that the Earth revolved around the sun.
It appears however that Lance Hockridge and his board of directors from QR National are “anti-Copernicans”. They do not adhere, that is, to the heliocentric school of cosmology. Rather, they believe that the sun actually revolves around Lance, perhaps even shining from him.
We surmise this because the board of QR has deemed that Lance should be placed above Acts of God.
While his shareholders, taxpayers and everybody else felt the ravages of floods and cyclones in Queensland – and indeed suffered the consequences – QR chairman John Prescott and the board adjusted the executive bonus scheme to quarantine Lance and his cohorts from the effects of Cyclone Yasi.
The damage to shareholders was $187 million. The damage to the freshly-beatified Lance Hockridge, Patron Saint of Zero Exercise Price Options, was nil. He was above the floods, beyond the cyclones.
Saint Lance left the Commonwealth Bank and Wesfarmers stranded in his wake. The latter were set upon by shareholders this week for twisting the pay benchmarks in order to give executives million-dollar freebies they hadn’t earned. But – like a gang of groundsmen in Centennial Park – they were merely shifting the goalposts.
They showed nothing of the ingenuity, the bold innovation of QR. So soon after departing the cardiganned ranks of the public service for the cuff-linked life of the corporation, Saint Lance and his anointed ones, mere apprentices in avarice, were teaching the old masters of remuneration new tricks.
But what about Wallace Macarthur King AO, you cry! Yes, dear Wallace and his $29 million package for walking away, or staying, or consulting and coming back … hmm, what was that performance benchmark, or was it a non-compete? Does it matter? It’s big!
It’s the big fat and cheesy executive pizza with the lot, except a carve-out for wet weather like Lance. But one mustn’t be snide; this is Wal, the man who even has an “effect” named after him. “The Wal King Effect” they call it in pay circles. Fair dinkum.
Wal’s pay rose to such eye-watering levels that it towed the entire market higher. The “effect” and his remuneration committees have single-handedly caused the transfer of a billion dollars from the unwashed shareholding classes to the far more deserving elite.
Lend Lease, Multiplex, United Group, they all won, but the Wal Effect operated outside the construction sector too. From Domino’s Pizza to Adultshop, it didn’t matter. STI, LTI, invent your own letters. It didn’t matter. This was about magnitude, sheer dimension: “Look at Wal! Benchmark me! I want some of that!”
And unlike Rupert Murdoch and Frank Lowy, whose appetite for shareholder cash is similarly ravishing, at least Wal had the nous to do it without having to found a company. He mostly eschewed shares in Leighton, too risky, preferring to ship out the folding stuff.
Outgoing Leighton chief David Stewart cops a sweet $7 million “termination” payment too, for just eight months in the job. And Wal, he’s up $118 million in the past eight years alone.
Saint Lance and his colleagues at QR can only dream of matching that. But you can’t fault them for innovation, and sophistry.
This is how their logic runs: had the floods and cyclone not occurred, QR would have surpassed its prospectus forecasts by 20 per cent. Therefore executives should be compensated.
That was the logic which propelled a public servant, worth $943,000 one year, to be priced in the executive labour market at
$1.7 million the next – before bonus of course at $1.664 million, which was 11 times higher than the year before.
Deploying QR-esque logic, had the global financial crisis not occurred we would all be better off so let’s double bonuses all round, topped off with a premium just in case the sun doesn’t rise sometime between now and June 30 – in which case we would all be dead – or a giant comet destroys the Earth.
And so three weeks are left to run in executive pay season. The impending lowlight this week is a situation so distressing it does not lend itself to flippant coverage at all. Here are the bare bones:
At BlueScope Steel’s annual meeting on Thursday, shareholders will be asked to approve $3.1 million in executive bonuses. The salary of the chief executive, Paul O’Malley, is up 1.3 per cent. But these rises came in a year when the board and executive presided over a $1.05 billion loss. Dividend to shareholders was nil. And the bonus announcement was accompanied by news that 1,000 workers are to be sacked.
There is more, sadly. BlueScope’s share price tanked 50 per cent last year. The company is struggling to survive and this week the government pushed a $300 million rescue package through the Senate for BlueScope and OneSteel.
This is the quintessence of corporate welfare, privatising the losses and capitalising the gains. Employees, taxpayers and shareholders have lost – executives have gained. At the least, the government should subtract $3 million for these morbid bonuses.
For the business community this is an ugly time of the year, the time when pay and performance come under the microscope in parts of the finance press. Pay inevitably exceeds performance.
Boards can, mostly, rely on institutional shareholders to push through their pay deals. Industry funds often take a more active line on pay but the big banks control much of the institutional vote via their wealth management divisions. They vote with the boards.
And they don’t have to disclose how they are voting with other people’s money, yet.