Westfield boss Frank Lowy yesterday agreed to surrender his $41,000-a-day salary in a shrewd piece of juggling, engineered with the assistance of his long-time friend, adviser and fellow director David Gonski.

Lowy will continue pocketing Australia’s most outrageous salary package until the Westfield AGM on May 25, after which he will step down with a $2.3 million retirement payout and become non-executive chairman earning $750,000 a year, according to The AFR’s Robert Harley.

While most Australian’s would love such a salary, Lowy doesn’t seem to value it all if you can believe this comment to Fairfax’s Adele Ferguson:

“What it means for me, other than getting no pay is I won’t be involved in the day-to-day business. I was going in that direction for a little while and this change makes it more formal.”

In other words, Lowy has been pocketing $15 million a year even though he hasn’t been full-time ever since he took on the big commitment of chairing Football Federation Australia in 2003-04.

The Westfield board was sent a very public warning about executive largesse in this column published on January 31, which included the following:

Despite turning 80 last October and spending much of 2010 on Australia’s failed bid for the 2022 World Cup, Frank Lowy is showing no signs of winding back his excessive $15 million salary from Westfield.

Given Westfield’s tepid share price performance in recent years, the upcoming AGM in May could be the time when shareholders in the world’s biggest shopping centre company rise up and demand change — or at least finally vote in numbers against the remuneration report.

It is remarkable to think that once Rupert Murdoch’s 80th birthday passes on March 12, Australia will be the only country in the world that can claim to have produced two 80-something CEOs of public companies who still demand telephone number salaries way above what their performance over the past few years could possibly justify.

Just like the tottering 82-year-old Egyptian leader Hosni Mubarak, Murdoch and Lowy have had it good for a long time dominating their empires. But the times are a changing on executive pay and both of these corporate legends would both be wise to announce a pre-emptive adjustment to their pay deals.

Or, more accurately, it is time for News Corp remuneration committee chair Sir Rod Eddington and Westfield remuneration committee chair Fred Hilmer to step up and bring their overpaid executive chairs into line.

Sure, we must respect our elders, but these blokes can do without the dollars and perhaps should reflect on whether it’s time to become non-executive chairs on modest pay deals.

Lo and behold, less than five weeks later and Westfield has done precisely that with yesterday’s three-page announcement on board succession.

The changes went a lot further than Lowy simply stepping back and were very much focused around avoiding more AGM shareholder protests from institutional investors underwhelmed by disappointing returns in recent years.

This explains why ASX chairman David Gonski will retire at the AGM. After 25 years of service, he knew that a substantial and potentially embarrassing protest vote was coming his way if he stood for re-election, especially given his role on the remuneration committee.

Institutional investors and their proxy advisers are increasingly targeting long-serving directors who are not deemed to be independent. Gonski at Westfield is a classic of the genre and did suffer a double-digit protest vote in 2008.

Long-serving Westfield finance director Stephen Johns serves as a non-executive director these days but he suffered a record protest vote in 2009 with 500 million votes against and 928 million in favour.

Strip out the 179 million Lowy family shares and that represented a protest vote of 40%. Expect  Johns to bow out as well next year when his three-year term expires after 27 years on the board.

The same rationale explains the departure of David Lowy as this year’s AGM. After 139 million shares were voted against him in 2009, there was going to be a much bigger protest this year from institutional shareholders who believe in public companies having a clear majority of independent directors.

None of this is to say that these out-going Westfield directors are no good. Indeed, Gonski and Johns are in my top 20 male directors list.

However, when you’ve got a controlling family who dominates the board and is surrounded by long-serving loyal supporters, shareholders are absolutely right to push for more independent directors.

And the biggest demonstration of that lack of independence at Westfield has been the failure to cut Frank Lowy’s excessive pay packet — until now.

With Westfield fixed, the big question now is what News Corp remuneration committee chair Sir Rod Eddington will do once Rupert turns 80 next week. The Sun King’s $20 million-a-year package is now the biggest disgrace tolerated by shareholders in an Australian listed company, which might explain why the Murdoch press went so soft today on the Lowy pay cut.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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