BLUESCOPE Steel chief executive Paul O'Malley has become the latest executive to step up for a pay freeze and forgo his bonus and long-term incentives in an effort to placate shareholder sentiment about management accountability.
His announcement follows that of BHP Billiton head Marius Kloppers, and Rio Tinto's Tom Albanese, who both decided to waive their bonuses. It also turns attention to whether the "two-strikes" policy is bearing fruit in boardrooms. If a company records two consecutive votes against its remuneration report it is required to put a spill resolution to shareholders.
With BlueScope set to record a $1 billion loss for 2011-12 after its restructuring of operations at Port Kembla and Westernport, Mr O'Malley said he thought his pay decision was appropriate. He said he didn't want the company's performance to be "obscured" by comment about his remuneration.
Mr O'Malley said the board had accepted his offer, and BusinessDay understands the board has told institutional investors for several months of the pay decision.
His announcement was made as BlueScope unveiled details of a $1.36 billion joint venture with Japan's Nippon Steel Corporation, which will give it access to the whitegoods manufacturing market across south-east Asia. BlueScope shares leapt by more than 55 per cent on the news, before closing up 34 per cent at 35?.
BlueScope's plummeting share price was the source of investor ire at last year's AGM, with a 39 per cent vote against its remuneration report as the company recorded a "first strike". The 2011 remuneration report awarded board members bonuses of $2.6 million. Mr O'Malley, on an annual salary of $2 million, received a $750,000 bonus.
Michael Robinson, from executive remuneration specialist Guerdon Associates, said the two-strikes policy was having an impact in boardrooms.
"They (the boards) are pushing right back. There's a lot of unhappy executives out there," he said
"They are still giving long-term incentive plans, but there's a lot of pushing back. I think boards in the past 18 months have been very assertive, particularly on base salary and bonuses."
He expected the Australian Council of Superannuation Investors survey on executive pay would show that 50 per cent of executives will receive fewer bonuses than last year.
Martin Lawrence, research director at Ownership Matters, said it was difficult to say whether it was two strikes, or that companies had traditionally responded to a strong "no" vote.
Australian Institute of Company Directors general manager of communications and public affairs, Steve Burrell, said executives who waived pay were "making judgments about the company performance, the business and the economic environment the company is operating in, and obviously the views of the shareholders are taken into account".
Australian Shareholders Association director Vas Kolesnikoff queried whether Mr O'Malley would have been entitled to a bonus anyway. "If he is, the board should be taking a good hard look at itself."
Frequently Asked Questions about this Article…
Why did BlueScope CEO Paul O'Malley forgo his bonus and long-term incentives?
Paul O'Malley waived his bonus and long-term incentives to address shareholder concern about management accountability after BlueScope's sharp share price fall and weak results. The article says he wanted the company's performance to stop being “obscured” by discussion of his pay and that the board accepted his pay freeze.
What is the 'two-strikes' policy and how does it affect executive pay and boards?
The 'two-strikes' policy means if a company records two consecutive votes against its remuneration report, it must put a spill resolution to shareholders. The article notes the rule is influencing boardroom decisions — boards are pushing back on pay, and remuneration advisers say base salaries and bonuses are being scrutinised more closely.
How did the market react to BlueScope’s $1.36 billion joint venture with Nippon Steel?
BlueScope announced a $1.36 billion joint venture with Japan’s Nippon Steel to access whitegoods manufacturing in southeast Asia. According to the article, BlueScope shares jumped more than 55% on the announcement before finishing the day up about 34%.
What is BlueScope’s recent financial situation and why does it matter for investors?
The article reports BlueScope was set to post about a $1 billion loss for 2011–12 after restructuring operations at Port Kembla and Westernport. That poor result helped trigger investor anger (a 39% vote against the remuneration report at the AGM) and is central to why executive pay became a focus.
Have other major company chiefs waived bonuses recently?
Yes. The article says Paul O'Malley followed BHP Billiton's head Marius Kloppers and Rio Tinto’s Tom Albanese, who both decided to waive their bonuses — highlighting a broader trend of executives stepping back on pay amid investor pressure.
What does this trend in executives waiving pay mean for everyday investors?
For everyday investors, executives waiving bonuses can signal that boards are more responsive to shareholder concerns and that pay is being more closely tied to company performance. The article quotes advisers expecting fewer bonuses for many executives and says boards have been more assertive on base salary and bonuses.
Did BlueScope’s board support O'Malley’s decision to forgo pay, and how was it communicated?
Yes. The article states the BlueScope board accepted O'Malley’s offer and had informed institutional investors of the pay decision for several months prior to the public announcement.
Is there any debate over whether O'Malley would have been entitled to a bonus anyway?
The article reports the Australian Shareholders Association director Vas Kolesnikoff questioned whether O'Malley would have been entitled to a bonus regardless of the circumstances, saying if he would have been, the board should take a hard look at itself — indicating some investors remain skeptical about how pay decisions are made.
Call 1300 880 160
Start a chat
Schedule a call
