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Is Australia Post’s Ahmed Fahour worth more than the PM?

Ahmed Fahour receives $2.78 million for running taxpayer-owned Australia Post — the highest-paid government employee in the nation. Is he worth it?

It’s been a big month for Australia Post CEO Ahmed Fahour, aside from the scandal around the Methodist Ladies’ College board on which he sits. Fahour reported a solid profit result for the taxpayer-owned monolith, with earnings after tax rising from by $40 million to $281 million on the back of sales increasing by $140 million.

The Latrobe University graduate announced the profit result in Melbourne yesterday, and was quick to brush off pesky questions of corporate governance, especially on his own remuneration. While the government-owned enterprise doesn’t provide a formal remuneration report like ASX-listed companies, it did disclose that its highest paid executive (Fahour) was paid $2.78 million in 2012 — an increase of 27% from the prior year, helped by a generous $874,000 bonus.

The remuneration made Fahour the highest-paid government employee — earning almost five times what Prime Minister Julia Gillard was paid last year.

In his press conference Fahour appeared to be ready to answer the inevitable question on his own pay, with Fairfax’s Ben Butler reporting Fahour’s explanation. The former NAB Australian boss explained that “we’re a commercial business, we compete against domestic competitors such as Toll for example, and we also compete against global competitors — UPS, FedEx, DHL, TNT — we have to pay compensation to attract the best people”.

Aside from the fact the best performed CEOs (like Oroton’s Sally McDonald) tend to take lower salaries, Fahour’s explanation still doesn’t make a huge amount of sense. For a start, around 40% of OzPost’s revenue comes from its monopoly reserved letters business, which means the commercial part of OzPost is a little over $3 billion in size (its non-reserved service also benefits from OzPost’s massive reach, especially in rural areas).

Moreover, Fahour is well paid compared to his competitors. ASX-listed Toll Holdings reported revenue of almost $9 billion last year and paid CEO Brian Kruger $2.6 million, less than what Fahour received. UPS, the American logistics giant, generated revenues of US$52 billion last year and paid just over US$7 million to CEO Scott David to run a business around 10 times the size of OzPost. DHL boss Ken Allen, who oversees a workforce of 275,000 (also around 10 times the size of OzPost) was last year paid £2.9 million.

OzPost’s corporate governance issues didn’t end at remuneration. Fahour also rejected claims Australia Post’s multi-million dollar Olympics sponsorship was a junket, noting “revenue was greater than our cost”. How could the taxpayer-funded enterprise generate revenue from giving existing clients who already use the service taking business class airfares, opening and closing ceremony tickets and $700-per-night five-star hotel rooms?

Crikey asked OzPost for clarification. A spokesperson said the Olympics sponsorship generated $8 million in additional revenue (as well as other benefits). The problem is, the $8 million in revenue had almost nothing to do with the generous hospitality Fahour showered upon his guests, which included AFL boss Andrew Demetriou.

OzPost confirmed to Crikey that most of the quantifiable “revenue” Fahour referred to was generated from the sale of stamps. But the stamp revenue would have been in place well before the business class flights were booked.

In a further justification for the Olympics spend, Fahour claimed that “the biggest sponsor of the Olympics was UPS, the world’s biggest parcel company” and that “it’s good enough for them, and they’re out there trying to woo their customers, and it’s good enough for Australia Post”.

Aside from the small fact that OzPost is taxpayer owner (not shareholder owned) and operates in a completely different market to UPS, Fahour also got his facts completely wrong. According to The Guardian, UPS was a third-tier London Olympics sponsor — handing over only US$31 million (top-tier sponsors paid US$100 million) — meaning 18 other companies were “bigger” sponsors than UPS.

4
  • 1
    DAVID SANDERSON
    Posted Friday, 12 October 2012 at 4:31 pm | Permalink

    I never thought I’d defend CEO salaries but here I am. Comparison with the PM’s salary is pointless as everyone knows that salary is kept artificially low.

    Fahour appears to be a reasonably successful CEO and his salary does seem comparable to others in similar positions. Schwab has cherry-picked the salaries that suit his case but a broader comparison is unlikely to create the conclusion he is looking for.

  • 2
    dunph
    Posted Sunday, 14 October 2012 at 2:25 pm | Permalink

    The Ahmed Car does not have the share options and equity opportunities available to public company execs; he was on a nice wicket at Citi and the NAB - and just like his northern suburb compadres Jac Nasser and Eddie everywhere McGuire - Ahmed is lining up for his place at the trough … Nothing unusual to see here.

  • 3
    Adam Schwab
    Posted Sunday, 14 October 2012 at 3:29 pm | Permalink

    @David - The examples used were actually companies specifically referred to by Fahour.

    The former NAB Australian boss explained that “we’re a commercial business, we compete against domestic competitors such as Toll for example, and we also compete against global competitors — UPS, FedEx, DHL, TNT — we have to pay compensation to attract the best people”

    No cherry picking there.

  • 4
    Kevin Tyerman
    Posted Wednesday, 17 October 2012 at 6:18 am | Permalink

    I am not convinced that raising the costs of small parcels by 30% to 40% for both domestic and international mail (disguised as an “average price increase” of 3.8% and 4%) actually keeps you “compet[itiv]e against global competitors” .

    Small businesses are already competing with a high dollar when trying to sell internationally, without the adverse effects of the cost of a 200 gram parcel to the UK rising from $12.50 to $17.20 on the 22nd October. A similar small parcel to the USA rises from $10.50 to $13.70 on the same day. Such a massive charge for small parcels discourages anyone overseas from buying products from Australia, while a similar parcel from the UK to Australia appears to cost £4.50. Earlier this year domestic parcels of the same size rose from $5.00 to $6.60 - a mere 32% increase by the simple act of removing weight categories and stating that domestic parcel post was increasing by an average of 3.8%.

    I am not sure that pricing your customers out of the International Marketplace is really a method of continuing growth, but I suppose that while mining is healthy nobody is too concerned about balance of trade any more.

    =-==-== — =-=-=-=-=
    Declaration of vested interest: I sell collectable items to the world market using Ebay, and shipping with Australia Post airmail from an inland regional centre.

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