Public company directors were glued to the webcast of the Leighton Holdings annual general meeting last Friday in order to find out whether outgoing chief executives Wal King and David Stewart would receive the $18-odd million they had been promised.

At stake was not just the money but the balance of power between shareholders and the boardroom clubs that have awarded huge sums of money to executives on seemingly low performance hurdles.

Investor anger with executive pay is just part of the global community outrage about corporate excess that has been simmering since the GFC, culminating in the Occupy Wall Street protests and their local counterparts.

At the meeting, it was a case of “Where’s Wally?”, as Leighton chairman Stephen Johns talked about everything but the heli-skiing, pig-shooting King Wal, who had led the company for 23 years until December 2010, and his less-colourful successor David Stewart, who lasted just six months.

But the shareholders were only interested in one thing. If losing one chief executive is a misfortune; to lose both looks like carelessness* — and had they been paid the money?

Behind the scenes, large shareholders and proxy advisory firms had been lobbying Leighton for months, asking why the two men should receive such huge sums as “bonuses”, termination payments and consultancy fees, especially in a year when the engineering and construction company had reported a $400 million loss.

Shareholders have been complaining about executive pay for years, of course, but this is the first year that company boards have actually had to listen. Amendments to the Corporations Act passed in February now allow a board to be spilled if the remuneration report receives “no” votes of 25% or more at two consecutive annual general meetings.

In the end, the Leighton board declined to pay up, with Stephen Johns saying that “we are not in the business of providing largesse”.  On the day, the remuneration report was passed by shareholders, but with a significant protest vote of 18.2%.

But even though the sums involved seem outrageous to the rest of us, who is to blame here, the two executives or the board?

US-based neuroscientist Dr Peter Whybrow, in his book American Mania, theorises that the human brain has evolved over hundreds of thousands of years in an environment defined by scarcity. This means that our brains have a reptilian core that is set up to acquire “as much as we can of things such as s-x, safety and food”.

Continually rewarding the “lizard core”, such as paying massive bonuses to executives for simply doing their job, weakens the other, more-evolved parts of the brain, which oversee social interaction and self-regulation, he says. In other words, if you had spent years getting paid a motza, wouldn’t you find it hard to turn it down?

No doubt highly paid lawyers are now poring over the finer details of those contracts, but in the meantime, Leighton is getting on with the job, appointing the personable and well-credentialled Hamish Tyrwhitt to the corner office and announcing that it expects to report a full-year profit of $600 million to $650 million for the year to June 2012. It is also poised to announce the appointment of a female board director.

Apart from Jack Tilburn, however, the worst part of the meeting was the large number of men who have joined Movember — although the hair growth on some of them was so sparse it was hard to tell if they were supporting men’s issues or psoriasis.

Is there a massive drop in the birth rate nine months after Movember, or am I the only woman who cannot abide facial hair on men? That, along with the Nicola Roxonesque announcement that Leighton would no longer be serving alcohol at AGMs, led me to pass my own private resolution.  Next year, I’m not going back.

*Disclosure: the author has been involved in a project for Leighton Holdings in the past (with apologies to Oscar Wilde)

Peter Fray

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