The
Qantas board – with the exception of James Strong who
only joined in May as a non-executive director – has some serious questions to
answer from shareholders who bother to ask. Why
hasn’t it been able to find a
successor to Geoff Dixon? After all, succession planning for the CEO is one of the
main requirements of a board.

Qantas’s current strategy is OK:
costs are being attacked as they should and the airline is still earning
profits, despite the higher oil prices, but Dixon was supposed to retire over
a year ago. His contract was extended and then
earlier this year Dixon said that he expected to stay past his end date around the
middle of next year. He was right – as announced yesterday.

So
who is doing the succession planning at Qantas? The board and chairman Margaret Jackson, or
Dixon?

The
situation is made a even
murkier by a bit of mutual board scratching: James Packer joined the
Qantas board about 18 months ago when Dixon was on the Leighton Holdings board. In
May he quit and popped up the next day on the PBL
board. And
then Peter Gregg (Qantas CFO) was allowed by the board to replace Dixon on the Leighton
board. It’s all a bit incestuous in a
corporate sense.

Gregg
was widely tipped as the Dixon replacement and the fact that he has
also extended his contract on an ongoing basis at the age of 51 means
he’s not completely out of the frame but is only considered CFO
material right now. Dixon is aged 66, and has agreed to remain CEO for
an indefinite period.

Dixon, whose
previous contract was due to expire in July 2007, will be paid $2.3 million a year in fixed salary, including pension
contributions. He is eligible for bonuses of up to 60% of that figure if
the company meets financial, safety and operating targets. Gregg’s previous contract was due to
end 31 December, 2006. He now gets a fixed salary of $1.4
million, including pension contributions.

Qantas will report a sharply lower
profit next week, which has been caused by higher oil prices and
operational matters.

Dixon also needs
to reverse a 24% fall in the company’s stock price this year, making
Qantas the tenth worst performing company in Australia’s
benchmark S&P/ASX 200 Index.

Peter Fray

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