Payouts at Leighton as heads roll

THE huge upheaval in the senior ranks at construction giant Leighton Holdings has left the company owing a raft of hefty termination payments, fuelling more ire from disgruntled investors and their scrutiny of the company's remuneration policies.

By InvestSMART · 27 Aug 2011

By InvestSMART ·
27 Aug 2011

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Executive remuneration has long been a talking point for Leighton shareholders, with long-serving former chief executive Wal King consistently ranking among Australia's best-paid executives, pocketing a total salary package of $14.7 million last year before retiring at the start of this year after 23 years in the top job.

Leighton's annual report, to be released next month, will detail Mr King's final package, which could reach $30 million including a $12.6 million termination payment.

The board's decision this week to dump Mr King's successor, David Stewart, will also come at a cost - as will chairman David Mortimer's decision to quit.

Under Mr Stewart's employment terms, he is entitled to receive a minimum of $3.4 million plus benefits, equivalent to one year's fixed remuneration and for complying with a two-year restraint period. He will also receive his share of any bonuses, though it is understood that most Leighton executives will not be entitled to most of their bonuses.

There will also be seven-figure payouts for deputy chief executive, Bill Wild, and Thiess managing director, David Saxleby, who both left Leighton this year.

For serving as a director for more than 10 years, Mr Mortimer will receive a one-off "retirement plan" payment equivalent to five years of his director fees, up to the point the plan stopped operating in 2008. This is expected to exceed $1 million.

Corporate governance proxy advisers had criticised Mr King's remuneration as chief executive for being too heavy on short-term cash bonuses and too light on long-term equity-based incentives.

Leighton have since resolved, starting with Mr Stewart, to incorporate a greater proportion of executive pay based on such longer-term share-based bonuses.

It is believed new chief executive, Hamish Tyrwhitt, will be remunerated accordingly.

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Frequently Asked Questions about this Article…

What caused the recent upheaval and large payouts at Leighton Holdings?

A major shake-up in Leighton’s senior ranks — including the retirement of long-serving CEO Wal King, the board dumping his successor David Stewart, and the resignation of chairman David Mortimer — triggered a series of contractual termination and retirement payments to departing executives.

How much did former CEO Wal King earn and what will the annual report reveal?

Wal King previously pocketed a total salary package of $14.7 million in the last year before retiring. Leighton’s upcoming annual report will detail his final package, which could reach about $30 million and is expected to include a $12.6 million termination payment.

What payouts is David Stewart entitled to after being removed as CEO?

Under his employment terms David Stewart is entitled to a minimum payment of $3.4 million plus benefits — roughly equivalent to one year’s fixed pay — for complying with a two‑year restraint period. He is also eligible to receive his share of any bonuses.

Which other Leighton executives received seven‑figure payouts?

Deputy chief executive Bill Wild and Thiess managing director David Saxleby both left Leighton this year and are reported to receive seven‑figure payouts.

What retirement payment will former chairman David Mortimer receive?

David Mortimer will receive a one‑off ‘retirement plan’ payment for serving as a director for more than 10 years. The payment is equivalent to five years of his director fees up to when the plan stopped in 2008 and is expected to exceed $1 million.

How have investors and governance advisers reacted to Leighton’s executive remuneration?

Disgruntled investors have increased scrutiny of Leighton’s pay policies. Corporate governance proxy advisers criticized Wal King’s remuneration for being too focused on short‑term cash bonuses and too light on long‑term equity‑based incentives.

Is Leighton changing how it structures executive pay?

Yes. Leighton has begun moving to a greater proportion of longer‑term, share‑based incentives in executive pay packages — a change that reportedly starts with David Stewart’s arrangements and is expected to apply to the new CEO.

Who is the new CEO and how will his pay be structured?

The article reports Hamish Tyrwhitt as the new chief executive, and it is believed he will be remunerated with a greater proportion of long‑term, share‑based bonuses consistent with Leighton’s recent pay policy changes.