Wesfarmers deaf to public’s pay scheme ire

by | Nov 9, 2012 | Uncategorized

Wesfarmers’ chief Richard Goyder fronts shareholders at the annual meeting today, asking for a large grant of shares under a new incentive structure.

Shareholders are being asked to provide a reward which they, themselves, did not enjoy as a result of their managers’ performance.

Apparently the last long-term incentive structure was not adequate. Goyder missed a bonus and now, with Wesfarmers’ return on equity at a fraction of what it was before the acquisition of Coles, the Wesfarmers’ board has gone back to ROE metrics – now off a very low base.

They just don’t get it at Wesfarmers either. Are they not hearing the public ire over indefensible pay schemes?

In the year before the gargantuan $20 billion acquisition of Coles in 2007, Wesfarmers’ ROE was more than 25 per cent. Its return on assets (ROA) was 8.1 per cent, its EPS $1.95 and its dividend $2.25 per share.

Last year in 2011 however the ROE was 7.7 per cent, ROA 4.8 per cent, EPS $1.67 and dividend per share $1.50.

Shareholders have lost value, executives have gained.

Richard Goyder’s fixed pay has risen from $2.475 million to $3.34 million and he has picked up almost $5 million in cash bonuses and $102,560 shares.

And now that ROE has been quartered by the acquisition of Coles, the Wesfarmers’ board has opted to fashion a new set of long term-incentives, worth $6.7 million for their CEO, but priced from the low, post-Coles return on equity metrics.

Let’s not forget that during the financial crisis, this company was afforded special protection under the government’s short-trading ban.

Shareholders, taxpayers, thanks for coming.


Michael West

Michael West

Michael West established michaelwest.com.au to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

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