In a decisive move to restore its reputation, the Qantas Board has announced substantial reductions in executive remuneration for the fiscal year 2023 (FY23). This comes in the wake of significant operational and legal challenges that have plagued the airline, leading to severe customer dissatisfaction and regulatory scrutiny.

Last September, the Board revealed a 20% reduction in short-term incentives for the Group Management Committee due to the mounting pressures facing Qantas. This decision reflected the Board’s recognition of the cumulative impact on the brand and customer relations.

Further compounding the airline’s woes, the Australian Competition and Consumer Commission (ACCC) initiated proceedings against Qantas, and the High Court found the airline in breach of the Fair Work Act for outsourcing ground handling work. Consequently, the Board withheld the balance of the FY23 short-term incentive for senior executives.

These issues, detailed in the 2023 Annual Report, showcased the mechanisms allowing the Board to impose remuneration consequences for both short-term and long-term incentives.

In a landmark settlement with the ACCC, Qantas admitted to misleading customers regarding flight cancellations. Subject to Federal Court approval, the airline will pay a $100 million penalty and has agreed to a $20 million customer remediation program. Additional penalties and compensation related to the Fair Work Act breaches are still pending.

Today’s Governance Review release has provided further context for these decisions. Despite no findings of deliberate wrongdoing, the review highlighted mistakes by both the Board and management that contributed to Qantas’s significant reputational and customer service issues.

Consequently, the Board has reduced former CEO Alan Joyce’s FY23 remuneration by a staggering $9.26 million. This includes:

• Forfeiture of 100% of the shares held under the 2021-2023 Long Term Incentive Plan (LTIP), valued at $8.36 million.
• A 33% reduction in his short-term incentive for FY23, amounting to approximately $900,000.

The Board has also decreed a 33% reduction in short-term incentives for affected current and former senior executives, resulting in an overall reduction of approximately $4.1 million for FY23.

In reaching these decisions, the Board evaluated the collective accountability of the Group Management Committee members. Despite their efforts to steer Qantas through the pandemic, their roles in the subsequent challenges warranted these reductions. Mr. Joyce, as the Chief Executive Officer, bore ultimate responsibility for the business outcomes, which is reflected in the forfeiture of his LTIP shares.

Furthermore, current Non-Executive Directors who were on the Board at the time will face a 33% reduction in their base fees this year.

The $8.36 million forfeiture assumes a share price of $6.20 as of June 30, 2023, as disclosed in the FY23 Annual Report. As of August 7, 2024, Qantas shares closed at $5.97.

This bold move by the Qantas Board signals a firm commitment to accountability and governance, setting a precedent for executive accountability in the face of corporate missteps.

Written by: Michelle Warner

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