BHP CEO Paul Anderson talked about the ego and jealousy that emerges when the top five executive pay figures are released in the annual report. Well you won’t see a better example than this email from Coles Myer CEO to his top executives attempting to justify why some executives are getting paid more than others. It is an absolute cracker.

I hope you will agree that this year’s report communicates effectively the progress we are making towards our goal of becoming number one retailer in all the brands we serve.

For me, it certainly captures the wonderful spirit of our people and their commitment to delighting the millions of customers who pass through our stores every week.

However, I expect that media coverage of the report will focus on the list of ‘executive emoluments’ paid to me and other senior executives during the last financial year which we are required by law to disclose.

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This note is to help put the issue into perspective.

The list shows that our Chief Operating Officer of GM&A and our new MDs of Kmart, Target and Myer Grace received greater compensation than their counterparts on the food and liquor side of the business.

We hired Warren, Hani, Larry and Dawn from North America because we needed a COO and MDs with retail leadership experience and skills unavailable in Australia to turnaround the distressed GM&A brands.

It is pleasing to see the turnaround progress which has already been made at Target and Kmart in
the past year. The leadership of these MDs is pivotal in us being able to successfully implement our five-year strategy and in developing the people who can succeed them in these brands.

To succeed in recruiting people of this calibre to our brands, we had to match in Australian dollars the US dollar compensation levels they could attract in the North American marketplace.

Last year’s compensation for Hani, Larry and Dawn shown in the Annual Report also included one-off payments made to them when they signed up to join Coles Myer. Such sign-on payments are commonplace in the North American marketplace when emoluments are foregone from previous employment.

It may also appear from the list that bonuses were paid to some executives even though their brands did not perform as expected.

The only executives on the list who received bonuses directly related to the financial performance of businesses were Alan Williams, Chief Operating Officer of Food and Liquor, and Larry Davis at Target.

When I joined the organization in September 2001, my remuneration package did include an unconditional additional payment of $800 000 to be paid in respect of the 2001/2 financial year.

However, following the company’s revised profit forecast in May, I advised the Chairman that I did not intend to accept that additional payment.

The bonuses paid to me and to Warren Flick which appear in the Annual Report do not relate to the financial performance of the organization, for which we properly received no incentive-related payment, but represent our achievement of our succession planning and safety-related incentive targets set by the Board.

These executive remuneration payments were subject to approval by the Board, most after prior consideration by the Board Compensation Committee.

The compensation paid to our former CEO Dennis Eck includes payments associated with his departure from the organization last year under agreements approved by the Board. Some aspects of these payments have their origin in agreements entered into in 1996 and 1997.

The compensation paid to John Schmoll includes payments in relation to his
retirement from Coles Myer in July.