Source:
http://www.thepowerindex.com.au/and-the-winner-is/leightons-wal-king-stands-out-amongst-the-high-earners/20110905366
Leighton’s Wal King stands out amongst the high-earners
Paul BarryMonday, 05 September 2011
Gee it's a hard life running a Top 100 company in Australia, especially with the GFC, the two-speed economy, falling share markets and all those ungrateful investors on your back. But at least you can make a quid.
According to the Australian Council of Superannuation investors (ACSI), Top 100 CEO pay has more than doubled in the last ten years, with the average pay packet rising from a paltry $2.45 million in 2001 to $4.98 million in 2010, and the median rocketing by 138% to $4.39 million.
That's more than four times the increase in the share prices of those Top 100 companies, three-and-a-half times the rate of inflation, and two-and-a half times the rise in wage levels.
Driving the biggest money trucks home last year were Commonwealth Bank boss Ralph Norris (with $16.1 million), Westfield's Frank Lowy ($15.96 million), and Leighton's Wal King ($14.7 million).
And amazingly enough, most of these top CEOs are now earning more than they were before the GFC hit.
Take Ralph Norris for starters. Between 2007 and 2010, according to ACSI, Norris's pay rose 146%, yet shareholders in CBA received a total return of only 1.8% (including dividends), while the share price fell. The bank's return on equity and return on assets also fell during the period.
Frank Lowy didn't get a pay increase between 2007 and 2010, but he could well have taken a cut. Return on assets and equity at Westfield fell during the period, and shareholders had a negative return of 20.7% (even after dividends). Needless to say, the share price also fell.
But the standout winner in the overpaid stakes is Leighton's recently-departed executive chairman, Wal King, who carved out a 7.8% increase in pay between 2007 and 2010, despite the group's return on assets and return on equity falling by roughly a third, and despite shareholders waving goodbye to around one fifth of their investment.
And that was before April 2011's disastrous $907 million write-offs, cancellation of the final dividend, and announcement of a huge capital raising, which have driven Leighton's share price down to $19 (less than a third of its 2007 peak).
As ACSI tartly observes in its report, the now-departed King has collected his loot and cannot be asked to repay any of the $41 million he has received in bonuses since 2007.
"A feature of King's pay during his tenure at Leighton was its insulation from ongoing risks despite the nature of Leighton's business as a contractor," ACSI writes. "Almost all of his incentive pay was delivered as cash bonuses based on achievement of profit targets with no capacity for these bonuses to be reduced should performance deteriorate – even shortly after they were paid."
So what does ACSI chief executive Ann Byrne think of this and their other findings? Not much, it appears. "Companies did do something during the GFC about tying CEO pay to shareholder value but it seems memories are short. We think they need to maintain their mettle."
ACSI's survey also shows that 90% of the Top 100's CEOs received a bonus last year, averaging nearly $1.6 million.
"Isn't that extraordinary?" The Power Index ventured.
"Well, Yes," was Byrne's blunt reply.
