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Is AusPost boss’ $4.8 million salary pushing the envelope?

Ahmed Fahour, the head of AusPost, has been paid an extraordinary $4.8 million. Should he really be paid 10 times more than his American and Canadian counterparts?

There have been some very high executive payouts in recent years — boardrooms seemed content to plunder shareholder coffers to pay multimillion-dollar stipends to the likes of Wal King, Richard Leupen, Allan Moss, Phil Green and Geoff Dixon. But those esteemed group of executives were at least employed by shareholder-owned companies; the same can’t be said for the head of Australia Post, Ahmed Fahour.

In its annual report (buried late on Friday to generate the least possible public attention), AusPost announced a steady 14% rise in revenue to $5.8 billion. However, if AusPost were a publicly listed company, shareholders wouldn’t be impressed by its performance. Sophisticated investors look largely to a company’s return on equity to assess performance — that is, how efficiently is the company using its invested capital. In the case of AusPost, it appears the answer is not very well — the entity’s return equity (stripping out an abnormal superannuation gain) actually fell from 16.8% to only 10.6% in 2013. The main reason was a sharp increase in capital used, with capital expenditure rocketing to $386 million. In short, AusPost is generating more profits, but only by using greater capital. (At the same, time, the business’ operating cash flows worsened, from $551 million in 2012 to $450 million.)

By virtue of its status and ownership, AusPost is a very unusual entity. The traditional mail business (its letter delivery business) notionally loses a lot of money ($218.4 million), while its unregulated packages business makes a lot of money ($648 million). Some say that Fahour and his fellow executives face a difficult task because of AusPost’s universal service obligation, but that overlooks an inconvenient truth: the money-losing regulated business gives AusPost’s package an incredible competitive advantage. That’s because the package business can use the entire AusPost network, including some 4400 retail outlets (of which 2651 are in rural areas) and the huge network of posties. So while AusPost’s package business doesn’t technically have a monopoly (it faces competition from a number of players like Toll and DHL), none of its competitors has its huge inbuilt advantage, especially with rural and east-west deliveries. That advantage comes from the infrastructure associated with the letter business.

Despite working for a public utility, Fahour was paid an unprecedented $4.8 million in 2013, including a whopping $1.9 million base salary and more than $2 million in incentive pay.

To fully understand the enormity of Fahour’s remuneration, it needs to be compared with other well-paid bosses. Fahour’s payout would have placed him among the top 40 executives in the country — that’s comparing against every single listed public company (not merely government enterprises). For example, Fahour was paid more than the bosses of Woolworths, Woodside Petroleum, Village Roadshow, Seven, Fairfax, Tabcorp, Seek, Super Retail Group, David Jones and JB Hi-Fi received last year. And don’t forget, those executives run highly profitable, publicly listed companies and have to answer to shareholders. Fahour is in charge of a largely protected monopoly and is paid by taxpayers.

Fahour’s remuneration is even more remarkable when compared to his international peers. The US Postmaster General (who runs an organisation many times larger than AusPost) received US$384,229 in 2012 (a figure that was criticised by US law-markers for being too high). That means Fahour is paid more than 10 times what his US counterpart is paid. Moya Greene, the head of Royal Mail in the UK, was paid 1.47 million pounds. Greene, who was roundly criticised for being overpaid, received around half of what Fahour was paid. Canada Post boss Deepak Chopra was paid a base salary of only CA$497,100 with the possibility of a 33% bonus.

Fahour’s salary isn’t merely high, it’s completely off the scale.

While Fahour, a former member of the BRW Young Rich List (by virtue of his roles at Citigroup and NAB), has become one of Australia’s highest-paid executives, he appears to show far less generosity to his fellow AusPost employees. Earlier this month, the Communications Workers Union sued Australia Post and Fahour personally after it refused to allow payroll deductions for union membership fees. The union alleged that the payroll stance was spurred by the Victorian union’s refusal to sign a new enterprise agreement.

Australia Post workers received a pay rise of 1.5% in 2013. Fahour, already one of Australia’s highest-paid executives, received a pay increase of 66%. 

Adam Schwab is the author of Pigs at the Trough: Lessons from Australia’s Decade of Corporate Greed, published by John Wiley & Sons in 2010

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  • 1
    Posted Wednesday, 23 October 2013 at 2:27 pm | Permalink

    Wouldn’t a proper costing of the parcel business include the cost of the network?

  • 2
    bushby jane
    Posted Wednesday, 23 October 2013 at 5:05 pm | Permalink

    Given that Fahour talks constantly about efficiencies that seem to be going to cut back on service, his remuneration certainly is excessive. (I don’t actually think any one person is worth that much money.) Also, the efficiency and speed of delivery of mail is decreasing, so this confirms that he is overpaid.

  • 3
    John Turner
    Posted Wednesday, 23 October 2013 at 11:03 pm | Permalink

    A good overview, but….

    # Why can’t I buy a postage stamp at a convenience store/ supermarket/servo (unless it’s a a PO)?

    #”Australia Post workers received a pay rise of 1.5% in 2013”. What about the contractors who do most of the 6/7 days a week parcel delivery,which is largely separate from the so called “universal service obligation” (a five days a week single delivery to street addresses)?

    #What sort of sweetheart deals has Australia Post done with big online retailers eg Kogan to enable them to offer free delivery - by AP contractor and only to street,not PO Box, addresses? Do the Trade Practices Act and related legislation have anything to say about this?

    #Why am I still waiting for an answer from AP several months after I lodged a complaint about increased prices and reduced services for PO boxes? ( When I contact them they say that they’ve tried to ring me - an odd choice for an organisation whose core business is the printed, not spoken, word).

    Mr Fahour has effectively privatised much of AP already. The UK govt is proposing to privatise its postal service (Royal Mail) . If our govt was to follow suit, what would AP ( and Mr Fahour, assuming he remains as CEO) be worth with or without all the benefits of monopoly?

  • 4
    Kevin_T
    Posted Wednesday, 23 October 2013 at 11:19 pm | Permalink

    Masterminding 3 price increases a year (April, July and October this year), removing weight increments and adding international zones so that some small parcels rise by 30% at a time and then get an additional smaller increase six months later - maybe he “earns” his $4.8 mill (while he makes Australian small businesses uncompetitive on the world market).

    Offsetting the massive price increases for regional customers with proposed removal of regional sorting, causing double to triple the time for many items to be delivered, even in the same town, may not help Australia Post’s business goodwill with regional customers who don’t have many options for the delivery of postal goods, but it may help to justify next year’s pay increase for the mighty Mr Fahour.

  • 5
    CML
    Posted Thursday, 24 October 2013 at 2:47 am | Permalink

    Fahour’s salary is disgusting. He currently earns more than NINE times what the Prime Minister is paid to run the entire country! How can anyone justify such an outrageous salary for a government owned organisation, which is a partial monopoly?
    I suppose you could argue that some PMs are not even worth the odd $500,000, but that is not the point. We must pay ever increasing costs for postal services of very poor quality. NOT ON!!

  • 6
    MJPC
    Posted Thursday, 24 October 2013 at 7:02 am | Permalink

    Friend I know recently needed to send boxes of specialist products to a school in the South Pacific. Used AP last time at a cost of $1500, this time used a freight forwarder at a cost of less than $600 (AP use the same airline, the only one that goes to the destination).
    Just sent him this article to understand where the extra $900 went.
    This pay for cutting service is just plain immoral!

  • 7
    bjb
    Posted Thursday, 24 October 2013 at 7:39 am | Permalink

    Well, if Tony Shepherd and his fellow business council types on Hockey’s Commission of Audit want to find some savings, there’s $4mill or more right here in Fahour’s remuneration.

    Won’t happen of course, as Fahour and Shepherd are part of the CEO’s club, and are unlikely to call for restraint there. More likely, Shepherd will recommend privatising of Aust Post, in which case you can be sure:

    1. service will decline
    2. prices will increase
    3. staff wages and conditions will decline
    4. Farhour’s remuneration will almost certainly double.

    It’s in the Tory DNA.

  • 8
    Jo Wagner
    Posted Friday, 25 October 2013 at 2:48 pm | Permalink

    I just want the man out..We use Australia Post at a substantial level for our business. The service is poor, unreliable and getting worse as the weeks go by. I want to know how Fahour justifies his obscene income? I also want to know why the charges keep escalating and the service, degenerating? I actually want to hear this man tell me and all the tax payers WHY he thinks he is worth millions and employees not worth…well, in comparison..nothing.J.

  • 9
    Jo Wagner
    Posted Friday, 25 October 2013 at 2:52 pm | Permalink

    One more thing…small business can be very vulnerable and if reliant on this monopoly ( as it is in rural areas) is at risk of dying if postal charges keep going up at the lightening speed occurring lately. J.

  • 10
    enquierer
    Posted Monday, 28 October 2013 at 11:49 am | Permalink

    you people should be asking Why A.P is asking for a stamp increase and Ahmed being paid so much when their new policy on delivering letters is “that if a postman is off sick for the day the area he covers is left till the next day and then there is double the letters and expected to finish without o/t being taken as they believe that the person off sick is being paid ,so Why should others be paid o/t to do the work to help out the community??WE DELIVER is not their logo anymore ,its more to do with delivering parcels ,and they are heading to a 3 day delivery ,as has happened in N.Z just lately!!

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