Leadership the Qantas Way
Alan Joyce's $24m golden parachute.
After four years of stalemate, and a two-year pay freeze, Qantas domestic cabin crew this week voted up a new enterprise bargaining agreement with the company.
Flight attendants will maintain their existing conditions, get a 3 per cent increase in base pay (from as low as $49,400) plus minor increases to allowances (worth up to $25,000 annually), and finally receive bonuses from 2018 and 2022, withheld by the company on the basis they were contingent on a new agreement. This is colloquially known as legal extortion.
Inflation in the 12 months to February was 6.8 per cent.The deal with the Flight Attendants Association means that Qantas has now bedded down all of its major outstanding industrial agreements.
This will be of no small relief to chief executive Alan Joyce, who could scarcely have the company in a protected bargaining period with its engineers or ground staff (at least those it hasn't already sacked illegally) when the finer details of his own pay are finalised in September.Dollar numbers that large will knock the conciliatory stuffing out of even the most co-morbid union official.
Unsurprisingly, 2023 will go down as a far, far better year for Joyce financially than reputationally. The haul will be more than sufficient to balm his egoic injuries. Joyce will receive his base salary of $2.2 million. His short-term bonus, at target, is also $2.2 million but could be as high as $4.3 million.
Under the 2022-23 Recovery Retention Plan, he will receive 698,000 Qantas shares worth $4.5 million (based on yesterday's closing price of $6.49). While these shares don't vest until June 30, the Qantas board set the performance conditions so low that Joyce has already met them. Under Joyce's 2021-23 long-term incentive scheme, up to 1,349,000 Qantas shares will vest on June 30. Half of those shares are based on Oantas' total shareholder returns versus the ASX100, while the other half are based on Oantas TSR versus a basket of global airline peers.
If Qantas is in the top quartile, Joyce gets the full allocation. If Oantas ranks merely in the second quartile, he gets half the allocation. As of today (with just three of 36 months remaining), Qantas ranks 27th in the ASX 100 and first in the global basket. Anything can still happen in markets, but Joyce is currently tracking to nearly 100 percent of this award, worth $8.8 million today. Those outcomes would represent realised pay for financial 2023 of between $15.5 million and $17.6 million, still short of his record $23.9 million pay for FYI8. However, there are a further three successive long-term incentive schemes that vested in the pandemic years of 2020, 2021 and 2022 under whiles Joyce reccheda total of1.040.500 shares worth $6.8 million
today. Each August, Joyce has offered- and the Qantas board has dutifully agreed -to"defer the decision on whether his rights will be forfeited or allowed to comert to shares by anocher 12 months.
To give Joyce his due. he received no short-term bonus in any of those three years, and for several months in calendar 2020, he even forwent his base salary.
Nevertheless, those bonuses are for years In which Qantas posted cumulative statutory losses of $6.3 billion. It would have been been a terrible look had Joyce banked them at the time, especially as his staff - the ones not already stood down or made redundant- were on a pay freeze. It's still a terrible look to bank them , decision has never been in question. Come August 2023, Joyce will trouser every last one of them. If you include the deferred bonuses, and still relying on today's share price. Joyce stands to take home between $22 3 million and $24.4 milition in the 14 months to August.
In Alan Joyce's industrial instrument,the Better Off Overall Test is that everyone eise makes him better off overall. He makes a killing in the good years. He sets aside his LTI in the terrible years, but then takes them later anyway.What a method.Joyce has made hard decisions Some of these will bear rich fruit over the long term. Others have poisoned the tree. Has he left the company in better shape than in 2008?It's only when the capes wave washes in that well really find out.
But to trash the brand on the way out the door-that is an absolutely calculated bargain by management to maximise their money. After the lean years they are filling their boots. It's a cyclical business and this is their timel But there are ways, ard there are ways. Joyce is on the last lap here and it’s alol about being an Australian business legend.
That's the long term bonus he's chasing now and the Qantas board is facilitating the joy ride.
He's accumulated enough monty to want for nothing material. What fills the void after that are the trappings of office and the adulation of his peers. Those are pricoless.
He will never regain the respect of his customers again.
FROM TODAYS AFR.