By Stephen Mayne
What sort of salary should a billionaire executive or director of a public company be paid?
In Australia there are about 40 billionaires and their salaries in the public company space tend to be lower than average. Indeed, the likes of James Packer at Crown and Solomon Lew at Premier Investments are happy to work for free.
For some strange reason Rupert Murdoch and Frank Lowy, the two richest and oldest billionaires still running major ASX-listed companies, are also the greediest when it comes to their salaries.
Warren Buffett turned 80 last August and has now resigned all his external board seats to focus on Berkshire Hathaway where he is paid an annual salary of just $US100,000.
Rupert Murdoch turns 80 in March and when asked (listen to audio here) at last year's News Corp AGM why he didn't work for Buffett's modest salary, had this to say:
“I have a fraction of Mr Buffett's wealth, and Mr Buffett doesn't have to do that, he only has to sell a few shares every year to have many many billions to play with.”
Given News Corp's sagging share price performance in recent years, proxy advisory firm CGI Glass Lewis last year described Murdoch's $US22.72 million pay packet as the 18th most outrageous across the top 500 companies in America. Yet there is no sign of any change.
Despite turning 80 last October and spending much of 2010 on Australia's failed bid for the 2022 World Cup, Frank Lowy is showing no signs of winding back his excessive $15 million salary from Westfield.
However, given Westfield's tepid share price performance in recent years, the upcoming AGM in May could be the time when shareholders in the world's biggest shopping centre company rise up and demand change – or at least finally vote in numbers against the remuneration report.
Murdoch and Lowy are in a league of their own when you assess what minority shareholders are paying Australia's other billionaires who run public companies.
Billionaires' pay play
Here's a quick look at what BRW valued our billionaires at and what salaries they extracted from public companies in 2009-10, starting with those taking the biggest pay packets.
Rupert Murdoch & sons: BRW does not value Rupert because he is a US citizen, but his family's controlling stake in News Corp is currently worth about $5.5 billion and carries no debt. The News Corp executive chairman was paid a total of $US22.72 million in 2009-10, down from a peak of $US30 million in 2007-08. Rupert's youngest son James Murdoch collected $US10.3 million last year, but at least this was down from $US17.1 million in 2007-08.
Older son Lachlan Murdoch is now a non-executive director who still managed to pick up $US1.8 million in 2009-10 courtesy of an adjustment to his severance package, so the total salary take for the family was a hefty $US34.8 million.
The Murdoch family own about 330 million News Corp shares which delivered $US46 million in dividends last year.
Frank Lowy & sons: finally reached the top spot on the BRW Rich List last year with a valuation of $5.04 billion. Salary package dropped marginally from $16.2 million in 2008 to $14.93 million in 2009. When combined with his three sons – Steven, Peter and David – the family was paid a hefty $29.65 million last year. They also own 179.6 million Westfield shares which paid them $142 million of unfranked distributions in 2010.
Mark & Peter Rowsthorn: Mark is the current Asciano CEO and his dad Peter was the Toll Holdings chairman in the earlier years before the 2007 demerger which created Asciano. BRW claimed they were worth $1.09 billion in 2008 but this fell to $643 million last year. Mark was paid $3.8 million in 2009-10, the latest in a series of controversial payments which again triggered a 41.5% against vote on the remuneration report. He is no longer the largest shareholder but owns 112.5 million Asciano shares worth $180 million but there were no dividends in 2010.
Paul Little: the outgoing CEO of Toll Holdings has attracted much controversy with past pay packets and in 2009-10 he finally found some shareholder support for the remuneration report despite still pocketing more than $4 million. His 37.5 million Toll shares delivered $9.37 million in dividends in 2010.
Gerry Harvey and Katie Page: the pugnacious executive chairman of Harvey Norman is valued at $1.69 billion and has twice had to cancel EGMs due to shareholder revolts about proposed executive incentive schemes.
Whilst Gerry claims to be modestly paid, his pay packet rose to a record $1.15 million in 2009-10. CEO Katie Page also enjoyed a 50 per cent pay increase to $2 million so the dynamic husband and wife team collected $3.15 million in total.
Gerry's son Michael Harvey is a non-executive director whose fees doubled to $150,000 in 2009-10. The family pocketed $46 million in fully franked dividends on their 330 million shares in calendar 2010.
Terry Peabody: was valued by BRW at $1.3 billion in 2008 but this fell away to $459 million in 2010 after Transpacific Industries got caught out with too much debt. The founder was ousted with a termination payment of $1.22 million last year which lifted his total pay from $833,000 to $2 million. Peabody has been diluted down to the second largest shareholder behind a London-based private equity fund and his 176.3 million shares are worth $239 million but didn't deliver a dividend in 2010.
John Grill: valued at $1.33 billion in 2008 but BRW marked the Worley Parsons CEO down to $971 million last year. Similarly, his 2008-09 salary package of $3.98 million halved to $1.94 million in 2009-10 but his 25.43 million shares still delivered $19.2 million in dividends in calendar 2010.
Kerr Nielson: the founder and majority shareholder in Platinum Asset Management was valued at $2.33 billion last year but was only paid a salary package worth $420,000 in 2009-10. His 322 million Platinum shares are currently worth $1.54 billion and delivered a very tidy $71 million in fully franked dividends in calendar 2010.
John B Fairfax: John and his brother Timothy were valued by BRW at $1.32 billion in 2008, although this fell to $603 million last year. John B Fairfax retired from the Fairfax Media board last November and was paid $152,600 in 2009-10. His son Nicholas, who remains a director, was paid $185,300. The Fairfax family received $5.87 million in dividends on their 235 million Fairfax Media shares in calendar 2010. (Fairfax is the publisher of this website.)
Gordon Merchant: the Billabong founder has never quite made it to billionaire status but his residual 37.7 million shares are worth more than $300 million and he pockets the standard $144,000 annual fee for non-executive directors.
Bruce Mathieson: the 25 per cent owner of the giant ALH pokies joint venture controlled by Woolworths is valued by BRW at $1 billion, but the retailer has declined to reveal what, if anything, the veteran publican is paid to run the operation. His package has never been disclosed in a Woolworths remuneration report over the five years he's been in charge so it must be relatively modest.
Paul Ramsay: the non-executive chairman of Ramsay Healthcare, Australia's biggest private hospital operator, was valued at $1.14 billion last year and was paid $309,000 which is slightly below average for a company capitalised at $3.5 billion. He received $32.5 million in fully franked dividends from the company in calendar 2010, so he doesn't exactly need the cash.
Andrew Forrest: the Fortescue CEO and largest shareholder was valued at $4.24 billion last year but was only paid $120,000 in 2009-10. His 937 million Fortescue shares are now worth about $6 billion, but they are yet to pay a dividend.
Kerry Stokes: valued at $2.29 billion in 2010 and that certainly hasn't come from excessive salaries. The executive chairman of Seven Group only pocketed $61,250 in 2009-10 whilst son Ryan Stokes, also an executive director, got even less with $26,250. Why bother when the 207 million shares or 67.87 per cent stake they control is worth $1.85 billion and delivered $72.45 in fully franked dividends last calendar year.
Gina Rinehart: the mining heiress is valued at $4.75 billion but her only public board followed the purchase of 10 per cent stake in Ten Network Holdings last year. Ten advises that the board is yet to determine what, if anything, billionaire directors such as James Packer and Gina Rinehart will be paid. The other non-executive directors averaged about $90,000 in 2010.
James Packer: the executive chairman of Crown was valued at $4.1 billion by BRW last year but drew no directors fees from the casino company or Consolidated Media Holdings, continuing a noble tradition started by his father Kerry. Crown delivered James $112 million of dividends in 2010 whilst CMH provided $46 million so who needs a salary with an annual income of $158 million?
Solomon Lew: the non-executive chairman and 42% shareholder in Premier Investments, which controls Just Group, does not draw any salary. His billionaire mate Lindsay Fox is also a Premier director and pockets the standard $80,000 fee. Mr Lew and his associated shareholders received $38.6 million in fully franked dividends in 2010.
Most rich-listers do the right thing
When you look through that field, it is good to acknowledge the generosity of those billionaires who are paid far less than they could demand.
And it is remarkable to think that once Rupert Murdoch's 80th birthday passes on March 12, Australia will be the only country in the world that can claim to have produced two 80-something CEOs of public companies who still demand telephone number salaries way above what their performance over the past few years could possibly justify.
Just like the tottering 82-year-old Egyptian leader Hosni Mubarak, Murdoch and Lowy have had it good for a long time dominating their empires. But the times are a changing on executive pay and both of these corporate legends would both be wise to announce a pre-emptive adjustment to their pay deals.
Or, more accurately, it is time for News Corp remuneration committee chair Sir Rod Eddington and Westfield remuneration committee chair Fred Hilmer to step up and bring their overpaid executive chairs into line.
Sure, we must respect our elders, but these blokes can do without the dollars and perhaps should reflect on whether it's time to become non-executive chairs on modest pay deals.
Imagine the kudos that would flow if one of them bit the bullet and decided to “do a Packer” by working for free. Don't hold your breath.
Stephen Mayne is a shareholder activist and commentator who publishes www.maynereport.com and can be reached on stephen@maynereport.com.
BusinessDay