In the ultimate slap in the face to long-suffering shareholders, the limp Leighton board, now controlled by Spanish construction company ACS, has handed former CEO Wal King one of the largest ever golden handshakes in Australian corporate history, paying the former executive $23.9 million in cash termination payments. This is despite Leighton’s announcing more than $1.2 billion in losses last year due to decisions made during King’s tenure.

In the past three years, Leighton’s share price has fallen by almost 75%. However, this share price cataclysm didn’t prevent King collecting a generous cash payment.

Perversely, the poorer Leighton’s performance, the more cash King appeared to take home.

In 2004, King was paid $8.2 million ($1.49 million in cash); this rose to $9 million in 2006 ($5 million in cash). Upon the appointment of David Mortimer as chairman in 2007, King’s pay skyrocketed to $16 million, before rising once more to $16.4 million in 2009. Almost all the monies paid to King were in cash, so while shareholders saw their investment dwindle, King suffered not. (In fact, King sold off virtually all of his equity stake in Leighton’s late last year, reaping a further $5 million).

In its annual report, released yesterday, Leighton’s announced that King received fixed salary of just under $2.5 million for six months work in 2010. That fixed salary was paid as Leighton was encountering billion dollar cost-blowouts at its Middle Eastern operations, Brisbane’s $4.2 billion Airport Link Road and the controversial $3.5 billion desalination plant in Victoria. King was also paid a fixed retirement package of $12.6 million in cash and a $4.9 million for agreeing to a three-year “restraint”. Apparently, the Leighton board is of the opinion that CEOs who oversee a 75% drop in share price are in strong demand.

King also received a consultancy agreement valued at $6 million over three years. A further $5 million payment for “satisfactory transition to a new CEO and leadership team” was not awarded. Fairfax reported this morning that King is seeking that payment, despite his subsequent CEO barely lasting eight months in the job.

To add further salt in shareholders’ gaping wounds, the Leighton directors obtained the assistance of no less than six external firms to advise on matters of executive remuneration. It appears that not only is the Leighton board incapable of acting in the interests of independent shareholders, but it also needs to spend millions of dollars to outside advisers to assist them in squandering shareholder funds on poorly performing executives.

In total, Wal King has received about $70 million from Leighton’s shareholders since 2004. It wouldn’t be unfair to suggest that King hasn’t proved great value for money in that time.

Peter Fray

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