Some of Australia’s largest companies enjoyed record profits and paid huge executive bonuses from earnings inflated by JobKeeper, and now they’ve been put on notice to curb their behaviour.
A $900 billion investment fund with substantial stakes in several Australian companies is speaking out against the boards paying generous executive bonuses while ignoring the impact of losses caused by the pandemic and collecting the JobKeeper support payment.
US financial giant Dimensional Fund Advisors holds major stakes in leading Australian companies such as Rio Tinto, BHP, Boral, Ampol, Wesfarmers and Star Entertainment Group, operator of Sydney’s Star casino.
The group says it intends to use its considerable voting power to move against boards continuing to pay executive bonuses despite the changed business conditions brought on by COVID.
Read: Big boost in profits for some companies receiving JobKeeper subsidy
“We want a guarantee around how executives should be compensated,” says Bhanu Singh, Dimensonal’s head of Asia-Pacific portfolio management.
“We want the metrics to be pretty clear. And we want the link to be based on long-term performance and not on single triggers.”
The federal government’s JobKeeper wage subsidy was a lifeline for thousands of small- and medium-sized business during the height of the pandemic. But many larger companies took advantage of the situation, amassing record profits and continuing with their executive bonus scheme.
The ABC found that at least 25 ASX-listed companies paid executive bonuses totalling $24.3 million after claiming JobKeeper subsidies.
Read: ATO on the hunt for illegal super withdrawals
With so much of Australia’s superannuation tied up in the fortunes of these companies, investors and shareholders are beginning to use their clout to influence company boards and how they operate.
“Corporate governance is the driver of price improvement and returns. So we take it very seriously,” Mr Singh says.
“We think the board of directors should manage all risks at the company and should have oversight over those risks.”
The Australian Council of Superannuation Investors (ACSI) is another group seeking to influence the makeup and behaviour of Australia’s corporate boardrooms in order to get the best returns for members.
Read: Super bubble crash may be underway, says analyst
It its Governance Guidelines, a list of investor expectations for listed Australian companies, ACSI lays out rules covering executive remuneration, director responsibilities, board composition and crucially, the management of risk.
“Culture, governance and remuneration march together,” ASCI says.
“Improvements in one area will reinforce improvements in others; inaction in one area will undermine progress in others”
ACSI says companies following the core principles of maintaining the company’s social licence, transparency, and listening to their voting shareholders will naturally produce sustainable, long-term wealth for its investors.
Should companies using JobKeeper be punished for paying executive bonuses? Or was it their money to do with as they saw fit? Let us know in the comments section below.
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