Baiting the Toothless Tigers

Kerry Packer has agreed to set up a corporate governance committee at PBL but in the same breath he joined other bigwigs in denouncing the ASX governance guidelines and the importance of independence on company boards. Also this week, ASIC's powers to prosecute dodgy dealers at the big end of town were severely undermined and those dinosaurs at the Business Council of Australia were at it again, arguing that legislation prescribing the level, design or structure of CEO pay serves no constructive purpose.

WEEK IN REVIEW

Executive pay put over hurdles

Big business's attempt to counter the public relations disaster over executive salaries starts in earnest today, with a 40-page set of guidelines on how Australia's largest companies should determine pay for their chief executives.

Full story: http://www.theaustralian.news.com.au/common/story_page/0,5744,7779929%255E643,00.html

The corporate salaries reducing a PM to pocket money

Business leaders wondering why the Federal Government is cracking down on corporate salaries have a new statistic to consider: 70 executives at Australian companies took home at least 10 times more than the Prime Minister in 2002-03.

Full story: http://www.smh.com.au/text/articles/2003/11/04/1067708212966.htm

Union chief in ANZ board tilt

Unions have launched a five-year program to use their membership muscle to gain representation on boards of large corporations using a vocal suburban mum as their secret weapon.

Full story: http://www.theaustralian.news.com.au/common/story_page/0,5744,7748678%255E643,00.html

Telstra pushes for a 'modest' 15% rise for directors

Telstra tried to justify a proposed 15 per cent pay increase for its directors yesterday, arguing it would be their first raise in four years and they would still be getting paid less than directors of other listed companies.

Full story: http://www.smh.com.au/text/articles/2003/11/03/1067708137358.htm

Watchdog to review all Rivkin testimony

Rene Rivkin's worst nightmare has come true after the Australian Securities and Investments Commission yesterday vowed to review all his previous evidence on share trading.

Full story: http://www.smh.com.au/text/articles/2003/10/31/1067566090173.htm

Corporate governance committee for PBL

Kerry Packer's Publishing & Broadcasting Ltd unveiled a new focus on corporate governance at its lively annual general meeting yesterday, where Mr Packer was forced to defend large bonus payments and the extended tenure of some directors.

Full story: http://www.theaustralian.news.com.au/common/story_page/0,5744,7718344%255E643,00.html

Dad's the word on BSkyB job

Shareholders threatening a backlash over yesterday's appointment of James Murdoch to run British satellite television company BSkyB are not expected to garner major institutional support at the company's general meeting next week.

Full story: http://www.theage.com.au/text/articles/2003/11/04/1067708207792.htm

Now we know how the Riches switched their riches

Jodee and Maxine Rich have failed to keep secret a potentially unlawful shuffle of their family assets being pursued by the corporate regulator.

Full story: http://www.smh.com.au/text/articles/2003/11/04/1067708213438.htm

WATCHDOG NEWS

Brierley flouts independent director 'nonsense'

Sir Ron Brierley, chairman of the Solomon Lew-controlled Premier Investments, has attacked corporate governance guidelines that spell out the importance of independence on company boards as "nonsense" and "crazy".

Full story: http://www.theage.com.au/articles/2003/11/05/1068013257154.html

ASIC gets a tooth pulled in court

The Federal Court has struck a major blow against the corporate regulator's powers to ban investment advisory firms for conflicts of interest, non-disclosure of commissions or inappropriate advice given by its authorised representatives.

Full story: http://www.smh.com.au/articles/2003/11/05/1068013260318.html

Focus on ASX in broker's fall

The Australian Stock Exchange's overseeing of the stockbroking community has again been called into question over the winding-up of Melbourne company Terrain Securities.

Full story: http://www.theage.com.au/text/articles/2003/11/02/1067708069147.htm

APRA warns pushy lenders

The Australian Prudential Regulation Authority has sent a fresh warning to financial institutions to take heed of "overheated property markets" and curb any temptation to lend "aggressively" to prospective home owners.

Full story: http://www.theage.com.au/text/articles/2003/11/02/1067708069284.htm

NEWS HIGHLIGHT

What's your CEO worth?

The Weekend Australian ranks the nation's top 100 executives to see if you're getting value for money.

JAMES Packer was asked this week at the PBL annual general meeting why he didn't earn a salary.

"It seems a little tight-fisted of your old man," said Hugo Kelly, a representative of shareholder activist website Crikey.

"I never thought I would be in agreement with Crikey," said Packer.

"Dad has always had the view -- which is great -- that neither he nor I get a salary from PBL."

In theory this makes James Packer -- the executive chairman of PBL -- the cheapest executive in Australia, when his salary, or lack of it, is measured against the company's performance for shareholders.

In The Australian's annual Shareholder Scorecard, to be published in full next Wednesday, PBL returned 16.1 per cent in the 2003 financial year.

But clearly Packer draws considerable wealth from the Packer family's private family company, which owns 36.4 per cent of PBL and collected $62 million in dividends last financial year.

But sadly for Packer he doesn't make The Weekend Australian's annual salary survey of chief executives, since he is the executive chairman of PBL.

The chief executive, Peter Yates, with an annual salary in 2003 of $3.76 million, does. He came in down the list of Australia's top 100 CEOs when measured against shareholder returns.

So which of Australia's top 100 bosses can be said to be giving shareholders the best value for money in relation to a company's returns?

Take a bow, Graham Turner, the managing director of travel company Flight Centre.

The annual review declares Turner the winner by a long shot, almost 50 per cent cheaper on our exclusive measuring system than his nearest rival, Ross Barker of the Australian Foundation Investment Co.

What makes Turner's performance and salary rating all the more remarkable is Flight Centre's shareholder returns for 2003. They were down 16.8 per cent as measured by LEK Consulting -- the demand for travel hit by the wave of terror and the war in Iraq.

But there is a rider to Turner's being named as Australia's cheapest CEO. His nominal title is managing director and the chief executive officer is Shane Flynn. Flynn's salary is not disclosed in Flight Centre's annual report but Turner said it was about $200,000.

A list of 11 other executives is disclosed and the average salary is more than $418,000.

At this level of salary Flight Centre's performance for shareholders drops but is still within the top 20.

It's also worth considering that Turner is Flight Centre's largest shareholder, with an 18.49 per cent stake. He collected more than $7.2 million in dividends.

"I do get substantial dividends but I do think I should get treated like everyone else," Turner said yesterday.

"We have a retainer of $80,000 and a percentage of the year's increase of profits is used to calculate the rest.

"For a company of our size if you don't get good results, you shouldn't be paid for it.

"But I think you should err on the side of generosity when the performance is good."

Turner says a salary of $900,000 for his top-ranking executives was justified in the boom years -- and about $200,000 in the bad. His comments are supported by the evidence.

Turner also comes in at No.3 for the best value CEO by market capitalisation, behind Telstra's chief Ziggy Switkowski and Frank Cicutto at National Australia Bank.

AFIC chief executive Ross Barker at No.2 in this year's list of best value CEO is a controversial result, because it comes after last month's attack by the Australian Shareholders Association on AFIC's proposed executive remuneration package. ASA labelled it as excessive, wasteful and poorly designed.

ASA chairman John Curry said shareholders also approved a retrospective payment earlier this month to Barker of $300,000, meaning his total salary for the year was just under $600,000. When that is taken into account, Barker, too, slips down the list but still stays in the top 20 of best value CEOs.

But Curry says AFIC's new executive pay plan could lead to as much as $140 million of free shares landing in the pockets of AFIC executives.

Gerry Harvey, the chief of Harvey Norman, who comes in at No.3, was paid just $260,000 and represents good value for shareholders -- but since he was also paid more than $7 million in dividends, thanks to his ownership stake in the company, he doesn't need to cry poor. Grant Harrod at office products group Corporate Express is No.4 with a salary of $362,049 against a shareholder return of 5.6 per cent for 2003. The company is predicting strong growth through the 2003 financial year.

This year's top five compares with last year's winner, the former chief executive of surfwear company Billabong, Matthew Perrin. His salary of $312,013 was higher than some of the others but Billabong's runaway share market success for the year meant he provided the best value for money. But Perrin still provoked shareholder outrage when he cashed in on Billabong shares in August last year, selling down his personal stake in the company and collecting a whopping $66 million.

Last on the list is Peter Chernin, chief operating officer of The News Corporation Ltd (publisher of The Weekend Australian). Second most expensive is Rupert Murdoch, chief executive and chairman of News Corp. This is the same as last year's ranking.

In Australian dollar terms Chernin took home $23.8 million last year while Murdoch's salary was $20.1 million. Even so, the company posted solid returns for shareholders, up 16.1 per cent, compared with the 2001-02 return of minus 46.1 per cent, according to the LEK data.

Harry Boon at Ansell rates as the most expensive CEO on a measure of salary to market capitalisation -- a measure that makes the salaries of Chernin and Murdoch more reasonable.

One of Australia's most expensive CEOs on both measures of shareholder performance is of little surprise. Aristocrat is too small by market capitalisation to make the list. But if it was included in the rankings, former chief executive Des Randall, who was sacked in April after a series of botched profit warnings, would win hands down with a salary of $3.3 million salary for a company worth just $610 million by June. Aristocrat lost a staggering 73.7 per cent in shareholder funds, according to the survey.

SATIRE

Brains aren't everything. In fact in your case they're nothing

Don't let you mind wander - it's far too small to be let out on its own

He always finds himself lost in thought - it's an unfamiliar territory

He doesn't know the meaning of the word "fear" - but then again he doesn't know the meaning of most words

I don't know what makes you so dumb but it really works

I don't think you are a fool, but what's my opinion compared to that of thousands of others

He does the work of three men: Larry, Curly & Moe

For further information

Contact:   Chris Owen
Email:   c.owen@labor.org.au
WWW:   www.bosswatch.labor.net.au