It took too long, but Alan Joyce has finally exited Qantas as CEO, with the airline announcing he’ll be out the door tomorrow night.
Before this morning’s early departure announcement, the long-serving CEO was going to leave the building on November 3 after the 2023 annual general meeting, but the board presumably decided it wasn’t appropriate for Joyce to preside over one final AGM.
As I outlined to the ABC yesterday, I had stopped being a long-term supporter of Joyce and was calling for his immediate exit. Last week’s farcical appearance at the cost-of-living Senate inquiry and the extraordinary ACCC proceedings were the two last straws.
With Joyce gone, attention will now turn to the Qantas board, particularly given the leverage that shareholders have through Australia’s unique two-strikes remuneration voting system.
Here’s a prediction of what will and should happen over the coming 14 months.
Firstly, the major proxy advisers will recommend a vote against the Qantas remuneration report at the upcoming AGM, on the grounds that the board was tone-deaf for not withholding the maximum possible bonuses to Joyce and his senior management team. Institutional shareholders won’t need any encouragement to vote against.
This will lead to a record Qantas remuneration protest vote, matching what happened when Joyce’s predecessor Geoff Dixon exited after the global financial crisis of 2007-08. Back then, there was a 41.48% protest vote against the 2008 Qantas remuneration report on the grounds that Dixon didn’t deserve to be the world’s highest-paid airline CEO.
This was followed up by an ever bigger 42.55% vote against the 2009 remuneration report after Dixon pocketed $12 million in his final year. However, this was before the Gillard government legislated former ACCC chairman Allan Fels’ two strikes recommendation in 2011, so there were no consequences arising from these consecutive non-binding remuneration protest votes.
The story of the two-strikes system over the past decade has been that a first 25% protest vote strike normally brings a board to the table for serious reform because they fear a second 25% strike, which automatically triggers a full board spill.
As things stand, only two of the nine Qantas non-executive directors are definitely due for election this year, that being former American Airlines CEO Doug Parker, who was appointed in May this year, and former Canberra public servant Heather Smith, who was only appointed on August 24.
Commendably, this morning’s statement confirmed that Joyce’s successor, Vanessa Hudson, will run the gauntlet of a shareholder vote on her board election, even though Australian CEOs are exempt from the regular three-year election cycle.
Given that Hudson was appointed to the board on May 5 this year, right now Qantas has 11 directors —but this will drop to 10 with Joyce’s resignation tomorrow, and then nine after the AGM when former DFAT secretary Michael L’Estrange will retire.
Unfortunately, there won’t be many long-serving directors up for election this year who shareholders can target. This is because chairman Richard Goyder, Jacqueline Hey and Maxine Brenner were all reelected with more than 97% support last year, and Belinda Hutchinson, Antony Tyler and advertising man Todd Sampson received even stronger support when last reelected in 2021. However, the Qantas constitution requires that one-third of the incumbent directors face election each year, so lots will be drawn to determine which one of the 2021 crew will run the gauntlet.
If ever there was a case study for why Australia should follow the UK and US model and move to annual elections for public company directors, then Qantas is it. If the full Qantas board was up for election on November 3, shareholders would have a lot more leverage.
The Qantas constitution (see page 28) also makes it extra hard for challenging director candidates to give shareholders an alternative. For nominees just to get on the ballot paper, they have to come up with signatures from 100 small shareholders or the backing of big investors who collectively own more than 5% of the company.
There are only a handful of public companies that have this undemocratic barrier to entry entrenched in their constitution, and if they really believed in good governance, it would have been removed years ago.
This partly explains why no external candidate has ever stood for the Qantas board during the 28 years it has been a public company. However, once the first strike is inflicted on the remuneration report at the November 3 AGM, the board will be terrified of a full spill next year if it doesn’t take serious action.
In this case, serious action also means replacing Goyder as Qantas chairman after six years on the board and five years as chairman. He’s clearly way too busy chairing Qantas, Woodside Energy and the AFL, all of which could individually constitute a full-time job given the complexities involved.
As this list shows, public companies that are engulfed in a major controversy usually lose their chair and CEO in quick succession. I very much doubt Goyder will still be in the Qantas chair after the 2024 AGM.
Ideally, Qantas will be able to go into next year’s AGM saying that it has a majority of independent directors unassociated with the various COVID-era scandals, be it illegal mass sackings, cynical schemes to confiscate flight credits, or the ACCC action over allegedly selling 8000 tickets for already cancelled flights.
For that to happen, three other directors would need to follow Goyder out the door, and two more untainted directors would need to be appointed. The company could do worse than appointing Fels and Rod Sims, the two best ACCC bosses of recent years, to the Qantas board.
As for who else should exit, a good start would be the existing remuneration committee, which this week foolishly recommended full retention bonus allocations for Joyce and Hudson, although we’re yet to see if they are planning to withhold some other elements of the future bonus schemes.
The Qantas remuneration committee is currently chaired by Jacqueline Hey and includes Maxine Brenner, Michael L’Estrange, Todd Sampson and Doug Parker.
Given that Parker is new and L’Estrange is going on November 3, that would leave Hey, Brenner and Sampson for the high jump.
This trio have already notched up a collective 28 years of service on the board, so it’s not as if they haven’t had plenty of time to get the Qantas ship in order.
Disclosure: Stephen Mayne owns 83 Qantas shares, worth $450.
