Qantas Group Ltd will reduce former CEO Alan Joyce’s 2023 pay by almost $9.3 million as it commits to implementing all 23 recommendations from its governance review.
The embattled airline has spent months considering Joyce’s bonuses, which the board withheld following a string of controversies.
Joyce won’t cry poor though, he’ll still pocket $14.3 million and is still in line for a 2024 top-up, including salary and bonuses.
The cuts to his potential $23.6 million package in the 2023 financial year, include $8.3 million in long-term incentives and $900,000 from his short-term bonuses.
Current CEO Vanessa Hudson will also have her short-term bonuses reduced by 33%.
The pay cuts took into account a $120 million lawsuit with the Australian Competition and Consumer Commission and the imminent decision of the Federal Court concerning penalties for the illegal outsourcing of ground handling workers.
"We let Australians down"
“It was important the board understood what went wrong and learned from the mistakes of the past,” chairman elect John Mullen said.
“It’s clear that we let Australians down.
“As the national carrier, it is our duty to make sure we always act in the best interest of stakeholders and hold ourselves to the highest level of accountability.”
The board considered the “individual and collective accountability of members of the group management committee”, Qantas said in an ASX statement.
“The board has also taken into account their performance in bringing Qantas through the pandemic and the challenges of standing up the airline through that period.
“The combination of these factors is reflected in the reduction of short-term incentives.”
Reputational damage has consequences
The company also made it clear that there were “no findings of deliberate wrongdoing” but mistakes by the management and board contributed to “significant reputational and customer service issues”.
As CEO at the time, Joyce bears the brunt of the consequences.
“This is reflected in the forfeiting of his 2021-2023 long-term incentive plan shares valued at $8.36 million,” said Qantas.
“Current non-executive directors who were on the board at the time will take a 33% reduction to their directors’ base fees this year.”
Controversies Qantas faced during Joyce’s tenure as CEO included the sale of tickets on already cancelled flights, the illegal outsourcing of workers and the handling of hard-to-use COVID-19 travel credits.
There was also anger when Joyce was given the green light by Richard Goyder to sell the majority of his shares in Qantas last June, as the share price was nearing $7. That decision, along with the ACCC’s lawsuit and Qantas’ High Court loss to the Transport Workers Union, crashed the share price.
The pay decision will be welcome
Several investor groups, including the Australian Council of Superannuation Investors and the Australian Shareholders Association, expressed concerns about Qantas paying over A$11 million in bonuses to Joyce following his early departure last year.
Qantas pilots welcomed the decision to withhold a significant portion of Joyce’s bonuses, highlighting the period as “one of the most damaging in the airline’s history”.
Australian and International Pilots Association president Tony Lucas said, “Management and the board must now deliver the cultural change that has been promised, especially by working constructively and collaboratively with the dedicated frontline staff.
“We look forward to the restoration of the national carrier so it can proudly be called the ‘Spirit of Australia’ once more.”
The Flight Attendants Association of Australia (FAAA) also supported the changes to the board, acknowledging the need for the airline to alter its business approach.
FAAA federal secretary Teri O’Toole emphasised the importance of recognising the hard work of front-facing employees, who bear the brunt of public opinion.
O’Toole stated, “Cutting executive bonuses by reducing 33% of their share allocation may be a start, but may not make employees feel their previous wage freezes and 3% increases in enterprise agreements is enough to recognise their hard work.”
Qantas will now turn its attention to rolling out a massive order of new aircraft to increase domestic and international capacity.