Qantas has undertaken a critical review of its governance practices, resulting in significant changes to executive compensation. This move marks a shift towards increased accountability and transparency within the airline’s leadership structure.
The review, which scrutinised board and management decisions over the past year, did not find any deliberate wrongdoing. However, it revealed catastrophic errors had severe reputational repercussions for the national carrier.
Governance Review Findings
A comprehensive governance review at Qantas has resulted in a significant reduction of the former chief executive’s exit package. This decision comes after the board and senior management were found to have made errors leading to ‘significant reputational and customer service issues.’ No deliberate wrongdoing was identified, but the governance processes were put under scrutiny.
The review, which covered a year-long period until October 2023, highlighted decision-making processes that negatively impacted trust among stakeholders. Qantas acknowledged multiple factors that contributed to the reputational damage and the deterioration of its relationships with customers and employees.
Impact on Former CEO’s Compensation
Alan Joyce, the former chief executive of Qantas, will see his exit compensation cut by A$9.26 million. This cut includes the forfeiture of shares valued at A$8.26 million, which were part of a long-term incentive scheme. The airline’s board reached this conclusion as part of its accountability measures.
Additionally, both current and former senior executives at Qantas will experience a 33% reduction in their short-term incentives. This measure forms part of the response to the governance review findings.
Senior Management and Executive Accountability
In September of the previous year, a 20% cut in short-term incentives for the financial year 2023 was announced due to ongoing challenges. This move was made in light of the customer and brand impact from cumulative events over time.
The Australian Competition and Consumer Commission’s (ACCC) proceedings further complicated the situation, with Qantas admitting to misleading customers about flight cancellations. A settlement agreement outlines a A$100 million penalty subject to Federal Court approval.
Legal and Financial Repercussions
Qantas has agreed to a A$20 million customer remediation programme as part of its efforts to address the identified issues. Penalties related to breaches of the Fair Work Act remain pending.
The legal intricacies of Qantas’ handling of outsourcing ground handling work have drawn attention, as reflected in the High Court’s findings. These events underscore the importance of high governance standards in corporate operations. Qantas continues to navigate these complexities while seeking to restore stakeholder trust.
The reduction of incentives for senior executives is seen as both a consequence of past actions and a commitment to future accountability. The board plans to withhold some short-term incentive deliveries to senior management as ongoing investigations continue.
Leadership Changes
Alan Joyce had been at the helm for 15 years, steering Qantas through numerous challenges including the 2008 global financial crisis. His planned retirement in November 2023 was brought forward, and he was succeeded by Vanessa Hudson, the first woman to lead Qantas.
Vanessa Hudson, previously the chief financial officer, has been tasked with leading Qantas through this period of transition. She faces the challenge of rebuilding trust and ensuring governance improvements are implemented effectively.
The leadership transition marks a pivotal moment for Qantas as it seeks to resolve ongoing issues and strengthen stakeholder relationships.
Board’s Commitment to Improvement
Newly appointed Chairman John Mullen has emphasised the importance of learning from past mistakes and improving governance practices. His remarks underscore the board’s commitment to acting in the best interests of stakeholders and upholding high accountability standards.
Mullen acknowledged the progress made by Vanessa Hudson and her team but highlighted the work still needed to restore trust across the board. Recommendations from the governance review are expected to drive better decision-making processes at the national carrier.
Through these developments, Qantas aims to implement stronger governance frameworks that align with stakeholder expectations and deliver improved outcomes in the future.
Qantas’s recent governance review highlights a commitment to learning from past mistakes and improving accountability.
The airline’s efforts to address governance challenges and restore trust signal a new chapter in its operational strategy.
