Summary Qantas former CEO Alan Joyce taking the fall for governance and executive remuneration issues in 2022/23. Board reduces Joyce's earnings by AU$9.26m (about $6m) and senior executives' bonuses by 33%.
While the report finds no deliberate wrongdoing, blame mostly falls on Joyce amidst Qantas' $100m fine and customer service woes. Today marks an ignominious day in the history of one of the world's oldest airlines, Australia's flag carrier, Qantas. Today, Qantas released two documents relating to the airline's performance in 2022/23, one of which scrutinized the board's decision-making and governance and another regarding executive remuneration.
Gone but not forgotten While today's announcements from Qantas are from separate reviews, they are inextricably linked. The Qantas Governance Review Report was commissioned in October 2023 and was primarily facilitated by an external business adviser appointed by the board. The remuneration review was the work of the board, which in September last year announced issues with bonuses and incentives awarded in FY23.
The Australian media has jumped all over these announcements with the sole purpose of attacking former CEO Alan Joyce and the long-term incentive and bonus payments he was awarded. The board has not missed the chance either, by deciding that Joyce's FY23 remuneration would be reduced by AU$9.26 million ($6m), forfeiting Long Term Incentive Plan (LTIP) shares valued at AU$8.
36 million ($5.4m) and reducing his FY23 short-term incentives by 33%, a reduction of AU$900,000 ($5.8m).
Today Qantas crept closer to Project Sunrise flights by inaugurating the new QF3 Sydney-Auckland-New York service. The board also decided to cut the incentives of current and former senior executives by 33%, bringing the overall reduction to AU$4.1 million ($2.
7m), including the AU$900,000 clawed back from Joyce. Current non-executive directors on the board at the time will take a 33% reduction to their base fees this year. The review found no findings of deliberate wrongdoing but said "mistakes were made by the board and management which contributed to the Group's significant reputational and customer service issues.
" Why is Joyce the only bad guy? That is a nice collegiate statement that would certainly support the 33% cut to bonuses paid to the senior executives and the cut in director base fees. However, it does seem to leave Joyce out on a limb and carrying the can for the failures, a view backed up by these comments: "Mr Joyce was the Chief Executive Officer of the Qantas Group. In this role he had overall accountability and responsibility for the outcomes of the business and this is reflected in the forfeiting of his 2021-2023 LTIP shares that vested in August 2023.
" In a day of surprises Qantas faced allegations it misled customers and later backflipped on its policy to expire COVID credits at the end of 2023. Part of the board's justification is the AU$100 million fine ($65m) Qantas received from the Australian competition regulator over accepting bookings for flights already canceled. It also pointed to poor customer service issues and fractured relationships with customers, employees and other stakeholders, but can all that blame really be laid at one person's door? There is no mention of anyone else losing share entitlements , and in fact, no one else is mentioned by name in the whole remuneration review; the only person named is Alan Joyce.
If the board and the senior executives are jointly responsible for the poor performance, why has Joyce been singled out, and yet many of the management team, including the current CEO, were sitting in the cockpit with him? After losing A$7 billion in three years Qantas has clawed back a third of that in the twelve months ended June 30th, 2023. The governance report prepared by a consultant is understandably a much longer document, running to 19 pages. It is a challenging read, but the best bit is buried in the Conclusion on Page 19, which says: "The Board takes full accountability for the events which damaged the trust that so many of our stakeholders place in Qantas, and is actively working with management to fully understand the lessons learned from the Governance Review and implement the identified actions.
" The Qantas Board appointed the CEO, and it is the Chairman's role to manage that relationship in the best interests of the airline, its shareholders, people and stakeholders. The report correctly identifies the Board as the group accountable for the outcomes, but the reality is that the buck stops at the Chairman's desk just as much as it does at the CEO's chair. In October last year, Qantas announced the current Chairman would retire prior to the Annual General Meeting in late 2024, giving him a year to go at a time of his own choosing.
On August 24, 2023, Alan Joyce announced Qantas had made an underlying profit of AU$2.47 billion ($1.6b) in FY23 after losing AU$7 billion ($4.
5b) in the three years of the pandemic. On September 5, 2023, he left the building, hounded out just 12 days after posting record profits, and now the Qantas Board blames him for all the trouble. How credible is that when the Chairman is still there and the CEO, a 30-year veteran at Qantas, sat alongside Joyce while all these failures happened?.
