The decision by Coles chief executive John Fletcher to hand back $1 million in performance bonuses should act as a wake-up call to company boards and remuneration consultants, according to a leading shareholder advocacy group.
Fletcher has reportedly agreed with the Coles board that he will not accept $1 million in shares he is entitled to under his contract because of the company’s poor performance over the past year.
Australian Shareholders Association Chairman Ian Curry says Fletcher’s decision should be welcomed.
“There is something fundamentally wrong where individuals benefit through contracts where clearly they haven’t performed,” Curry says. “It is right that this has happened, although the extent to should have been a greater sacrifice will continue to be debated.”
But, he says, says it would be better if boards ensured executive contracts were structured so that they would have no choice but to hand back payments or bonuses that are undeserved.
“The individual shouldn’t necessarily have to say I’ll forgo something or have a hard negotiation with the chairman; it should be quite clear in the contract if a business changes control then benefits aren’t paid if the performance isn’t there,” Curry says.
This isn’t the first time that the acquisition of a company has skewed share prices and caused a chief executive to voluntarily reconsider their entitlements. Curry says Wesfarmers’ former chief executive Michael Chaney did something similar when the company grew massively after acquiring Bunnings several years ago.
He hopes such events will serve as reminder to boards and the remuneration consultants that advise them.
“Remuneration consultants need to think this through, and boards need to push themselves to see that contracts are changed so that this doesn’t happen,” Curry says.
Comment
Chris Hickey writes: Good show, it's great to see someone accept they are not worth the world. Why didn’t he hand it to his staff? Or at least half of it? Are they not worth it?
As far as I can see nobody, repeat nobody, should be paid more than our Prime Minister. They may generate more, but no job is more important than running our country. On a side note, imagine Kevin Rudd as Prime Minister; God help us!
It’s clear that globilisation is affecting the world's wealth. I certainaly am no communist, but the current state of the world's wealth is shared between far too few people. Is this the type of climate that generated support for communism? If so, we had best sort it out, sooner than later.
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