It takes a lot for an executive salary to make the front page of almost every newspaper in the country, which shows just how unusual Australia Post CEO Ahmed Fahour’s 2016 pay packet was. This would have come as no surprise to Crikey readers, as we have highlighted Fahour’s burgeoning remuneration over a number of years. So rather than rehash details of Fahour’s back-pocket care of Australian taxpayers, let’s focus on some of Australia Post’s attempts to justify Fahour’s $5.6 million salary.
Ham-Fisted Excuse No. 1: Mr Fahour’s total remuneration package takes into account the size and complexity of the organisation, which has an annual turnover of more than $6 billion (Australia Post announcement)
AusPost isn’t overly complex, and it also isn’t especially large. AusPost has 50,000 employees; the US Postal Service has more than 600,000. AusPost has revenue of around A$6.5 billion, US Postal Service has revenue of around A$90 billion. However, US Postal Service pays CEO Megan Brennan a mere A$543,000 — less than a tenth of what Fahour creamed off taxpayers last year.
Ham-Fisted Excuse No. 2: 73% of Australia Post’s revenue comes from the non-regulated side of the business, where it is competing with major global players such as DHL, FedEx and Toll. (Australia Post announcement)
AusPost’s annual report actually notes at page 76:
So either AusPost can’t read its own annual report, or the annual report is wrong. In any event, AusPost’s major competitor in the parcel space is Toll (which was has been bought by Japan Post). In Toll’s last annual report in 2014, it noted CEO Brian Kruger was paid $4.9 million (of which $1.7 million was equity based long-term performance shares). So Fahour’s cash pay is around double what is paid to the CEO of its publicly listed competitor.
Ham-Fisted Excuse No. 3: Mr Fahour’s remuneration in FY16 included a performance-based short-term bonus in line with Australia Post returning to profit. The previous year he did not receive a bonus. (Australia Post announcement)
AusPost made a profit of $36.4 million last year — this was down from $281 million in 2012, not exactly grounds for popping out the Cristal. Fahour’s salary was almost a sixth of the entire organisation’s net profit. As for performance, the taxpayer-backstopped business generated an anaemic return on equity of only 2.3%. In most cases, this would lead to termination, not a multimillion-dollar bonus.
Ham Fisted Excuse No. 4: Since 2007 Australia Post has paid more than $6.3 billion in dividends and taxes to the federal government. Australia Post does not receive any taxpayer funding. (Australia Post announcement)
According to Australia Post’s own annual reports, since 2007, it has paid corporate tax of $787 million and dividends of $1.7 billion. So it appears that AusPost yet again misled in its announcement last week. Even worse, Fahour only commenced in February 2010 so the first results he influenced would have been 2012. Since then, AusPost has delivered $747 million combined in dividends and taxes to the government. In its own press release, AusPost inflated Fahour’s contribution by around $5.6 billion.
Ham-Fisted Excuse No. 5: Total executive remuneration has not increased since 2014, when the executives last received their full eligible performance bonus. (Australia Post announcement)
In 2014 Fahour trousered the outrageous sum of $4.6 million — last year, he collected the even more obscene $5.6 million. It appears Australia Post may have hired Sean Spicer as its media liaison given its apparent penchant for alternative facts.
Ham-Fisted Excuse No. 6: “A contract is a contract … I suppose you halve it and the guy you have got, who is good, walks out.” (John Stanhope, Australia Post Chairman)
For a start, there are very few people in Australia who believe Fahour has done a good job. Insiders claim that when Fahour took the job in 2010, he was utterly unaware of the magnitude of the decline of letter services and was far too slow to restructure the business. Fahour cleaned out key executives, including those loyal to Terry Sinclair (who had been favoured for the top job), losing key knowledge. It’s also forgotten that while the regulated letter services is unprofitable, its distribution network provides AusPost with a massive advantage in the competitive parcels sector, especially to remote areas, where competitors like DHL and Toll are unable to viably compete.
While Stanhope, the genial former Telstra CFO, can’t be blamed for signing Fahour’s contract, he certainly is responsible for keeping him in the job for so long.
Ham-Fisted Excuse No. 7: “Had he been successful in running one of the top four banks, he’d earn twice that amount.” [“remuneration expert” John Egan]
There’s always a remuneration consultant on hand to justify every CEO salary, not matter how outrageous — enter John Egan, who for more than 20 years has been helping boards overpay CEOs. Egan’s comments would be comical if it weren’t so serious. Fahour’s $5.6 million would put him at 31 on the Financial Review’s list of highest paid CEOs in Australia. That is above Richard Goyder, who runs the $65 billion Wesfarmers and around the same as Telstra CEO Andy Penn. Let’s not forget Fahour is running a public utility that is backed by taxpayers, not an ASX-listed giant. Meanwhile, Andrew Thorburn, who is CEO of NAB (one of Egan’s big four banks) got $6.9 million last year, so Egan can’t even get his most basic facts right.
Ham-Fisted Excuse No. 8: “We asked them not to disclose it for competitive reasons.” (John Stanhope)
If Fahour were looking for a job, one suspects he’d be pretty quick to disclose his ask, so the confidentially wouldn’t last long. Then there’s the fact that his 2014 salary was disclosed, so the market knew roughly what Fahour is paid in any event (the secrecy simply served to focus extra media attention).
Australia Post’s appalling press release justifying Fahour’s salary was filled with largely fraudulent claims attempting to defend what clearly is the most abhorrent executive pay ever made in Australia. While Allan Moss’ infamous 2007 pay of $33 million was larger, Moss at least built one of Australia’s most successful ASX-listed companies; the same cannot be said for Fahour.
* Adam Schwab is a former top-tier lawyer and the author of the best-selling Pigs at the Trough: Lessons from Australia’s Decade of Corporate Greed in 2010.