Today, we’ve released the Qantas Group’s for FY23.
The report gives a lot of detail on our financial and non-financial performance, which is positive in many respects.
However, it comes at a time when the company is experiencing an acute loss of trust from the community, and accumulated disappointment from customers, which the Board and Management are determined to fix.
Much of the loss of trust stems from allegations by the ACCC. We recognise the important role of the ACCC and the company has cooperated fully with its investigations, which only crystalised into material allegations when legal action was announced on 31 August this year.
These allegations are concerning and have the Board’s full attention. The legal process now underway limits what we can say for the time being and we look forward to the opportunity to respond properly on the detail of the allegations. What we can say is that Qantas’ longstanding practice is that when a flight is cancelled, customers are offered an alternative flight or a refund.
EXECUTIVE REMUNERATION AND BOARD DISCRETION
Among the disclosures in the report is Executive Remuneration for FY23.
The scorecard that determines short term incentive payments has a number of financial and non-financial measures, including safety, customer satisfaction and emissions reduction.
Importantly, operational safety performance remained strong in a year when the Group doubled the number of passengers it carried to 46 million. We bettered our net emissions reduction target by 3 per cent. And Qantas was more punctual than its major domestic competitor for 11 out of 12 months.
While customer satisfaction levels improved during the year, they are well below where they should be. As a result, this part of the scorecard was judged at zero out of a possible 20 per cent and this had a corresponding impact on senior executive pay.
In addition, the Board has applied its discretion to reduce short term incentives for senior executives for FY23 by 20 per cent in recognition of the customer and brand impact of cumulative events.
While the ACCC’s recent allegations are untested, the Board understands shareholder and community concerns about them coinciding with significant executive pay outcomes. As part of good governance, after applying the 20 per cent reduction the Board will withhold the balance of the FY23 short term incentive for senior executives while this matter progresses.
There are already clawback provisions on significant amounts of remuneration awarded but not yet released that would be used if significant misconduct was ultimately found.
In the case of Alan Joyce’s remuneration for FY23, in addition to $2.2 million in short term bonuses that have been withheld, a further $8.3 million of a total adjusted $21.4 million is subject to clawback should the Board determine that necessary. When combined with additional long-term incentives already granted, a total of $14.4 million is subject to malus and clawback if considered necessary.
Looking ahead, the Board has significantly increased the weighting on customer outcomes for remuneration in FY24 and introduced it as a metric on future long-term incentives.
While there is much work to do right across the Group, we can’t lose sight of the many positives. This includes the fact we are tackling the current challenges with strong financial foundations, in stark contrast to the past few years, giving us the ability to invest in customers, new aircraft and more people.
We’re determined to bring Qantas back to its position as one of the most trusted brands. That can only happen by consistently delivering to the standards people rightly expect, and the Board is working closely with Vanessa and her new management team to ensure that happens.
