Shares in Leighton Holdings have now surged 80c in two days to this morning’s record high of $16.30 which, after last week’s AGM, is an extraordinary vote of confidence in CEO Wal King after his equally extraordinary bonus payments and new contract were revealed. There’s been a lot of confusion about King’s pay deal so let’s spell it out in full.

April 2005: King was paid $25.3 million for long-term bonuses relating to 1998-2000.

Late November 2005: King will be paid another $23.1m on November 30 for long-term bonuses relating to 2000-2005.

1998-2005: King was paid more than $25 million, in addition to the $48.4 million in bonus payments.

December 2005: new three year contract commences, which is capped at $9.2 million for 2005-06.

The new contract won’t be as excessive as the previous deal, which has averaged almost $10 million a year. However, it still includes the following tasty components:

  • $2.7 million base cash salary
  • Up to $2.7 million in short-term bonus which is performance-related
  • Up to $4 million a year in long-term bonus which is performance-related
  • Parties can agree to extend the three year deal by another year
  • After four years, if Wal King retires he will received another $3.6 million over two years to not work for a competitor

The idea of continuing to pay someone who is retiring at the age of 65, as King will be in 2009, after amassing a fortune of more than $100 million over 41 years with the company is just a joke. What sort of loyalty system does Wal King have that he can’t just honourably retire?

The voting at last week’s Leighton AGM was remarkable when you consider the scale of King’s remuneration and the questionable way it was disclosed throughout the course of the year.

German construction giant Hochtief controls 144 million of the 274 million shares on issue, but who would have thought only 3.88 million shares would be voted against the remuneration report? Similarly, only 3.44 million shares were voted against a $700,000 pay rise for the non-executive directors, lifting their maximum annual cash take to $2 million.

Leighton shares have rocketed from less than $10 in May this year and from just 90c when King took over as CEO in 1987, but more than 90% support for all resolutions was still a major surprise. The company is clearly performing on all cylinders and shareholders don’t seem at all concerned about the stratospheric salary package for the man who has made it happen.