Pays to be boss not worker at Pacific Brands
Ari Sharp and Ian McIlwraith
February 28, 2009
http://business.theage.com.au/business/pays-to-be-boss-not-worker-at-pacific-brands-20090227-8kea.html
PACIFIC Brands' former chief executive, who ran the debt-fuelled buying spree that contributed to the savage job cuts announced this week, was effectively given a big pay increase in the final year before he left the company.
An analysis of executive pay at Pacific Brands since it listed in 2004 shows that while the company's department heads averaged $667,000 in that first year, by the end of June last year they were getting an average of $924,000 each — an increase of about 40 per cent.
When announcing the plan to shed 1850 employees earlier this week, chief executive Sue Morphet said the redundancy costs would be about $100 million, suggesting an average payout of less than $55,000 for each worker.
Ms Morphet's predecessor, Paul Moore, was on a much more generous basic salary and bonus system before she took over in January last year.
Pacific Brands' annual reports show the company wound back its executive incentive system between 2007 and 2008. While Mr Moore was entitled to get a bonus of up to 200 per cent of his base pay of $1.2 million in 2007, his last full year with the company, he received only $250,000.
When Ms Morphet was appointed, the board doubled her basic salary from about $350,000 to $700,000, reflecting her promotion from running a division to running the lot — but her bonus was limited to 100 per cent of that base.
Pacific Brands also shifted the hurdle rate for executives to qualify for a bonus. In 2007, the test was a 5 per cent increase in net profit for the company, which it just made. Most executives that year only received fractions of their potential bonuses.
In 2008, that shifted to the executive team having to beat a budgeted 17.6 per cent increase in earnings before interest, tax and amortisation. Again, the company only narrowly beat it.
Pacific Brands' net profit since listing in 2004 has gone from $88.4 million to $117.1 million last year, an increase of about 32 per cent. Its shares have also dramatically underperformed the overall market in the five years, having shrunk from a $2.50 float price to a close of 22.5¢ yesterday.
The 2008 executive payments figure excludes the extra $3.5 million Mr Moore received as a retirement payment when he stood down halfway through the 2008 financial year.
As well as that payment, Mr Moore's salary was 22 per cent up on the 2007 financial year — when he was chief executive for the entire year. Included was a jump in his basic salary of more than 30 per cent to $1.56 million for the half-year he was there.
If he had served as chief executive for all the 2008 financial year at the same pay rate, his package would have skyrocketed 145 per cent. During his tenure, the company went on an acquisition spree that included the Yakka Group of companies, including the iconic Hard Yakka brand, streetwear labels from Globe International and the Sheridan bed linen business.
The failure of the company to properly manage its portfolio of more than 300 brands and its more than $800 million in debt were cited as key problems that triggered its decision to cease clothing manufacturing and shed more than 1800 workers.
Mr Moore was unable to be reached yesterday. Pacific Brands did not respond to requests for more information on its executive bonus schemes.
Ari Sharp and Ian McIlwraith
February 28, 2009
http://business.theage.com.au/business/pays-to-be-boss-not-worker-at-pacific-brands-20090227-8kea.html
PACIFIC Brands' former chief executive, who ran the debt-fuelled buying spree that contributed to the savage job cuts announced this week, was effectively given a big pay increase in the final year before he left the company.
An analysis of executive pay at Pacific Brands since it listed in 2004 shows that while the company's department heads averaged $667,000 in that first year, by the end of June last year they were getting an average of $924,000 each — an increase of about 40 per cent.
When announcing the plan to shed 1850 employees earlier this week, chief executive Sue Morphet said the redundancy costs would be about $100 million, suggesting an average payout of less than $55,000 for each worker.
Ms Morphet's predecessor, Paul Moore, was on a much more generous basic salary and bonus system before she took over in January last year.
Pacific Brands' annual reports show the company wound back its executive incentive system between 2007 and 2008. While Mr Moore was entitled to get a bonus of up to 200 per cent of his base pay of $1.2 million in 2007, his last full year with the company, he received only $250,000.
When Ms Morphet was appointed, the board doubled her basic salary from about $350,000 to $700,000, reflecting her promotion from running a division to running the lot — but her bonus was limited to 100 per cent of that base.
Pacific Brands also shifted the hurdle rate for executives to qualify for a bonus. In 2007, the test was a 5 per cent increase in net profit for the company, which it just made. Most executives that year only received fractions of their potential bonuses.
In 2008, that shifted to the executive team having to beat a budgeted 17.6 per cent increase in earnings before interest, tax and amortisation. Again, the company only narrowly beat it.
Pacific Brands' net profit since listing in 2004 has gone from $88.4 million to $117.1 million last year, an increase of about 32 per cent. Its shares have also dramatically underperformed the overall market in the five years, having shrunk from a $2.50 float price to a close of 22.5¢ yesterday.
The 2008 executive payments figure excludes the extra $3.5 million Mr Moore received as a retirement payment when he stood down halfway through the 2008 financial year.
As well as that payment, Mr Moore's salary was 22 per cent up on the 2007 financial year — when he was chief executive for the entire year. Included was a jump in his basic salary of more than 30 per cent to $1.56 million for the half-year he was there.
If he had served as chief executive for all the 2008 financial year at the same pay rate, his package would have skyrocketed 145 per cent. During his tenure, the company went on an acquisition spree that included the Yakka Group of companies, including the iconic Hard Yakka brand, streetwear labels from Globe International and the Sheridan bed linen business.
The failure of the company to properly manage its portfolio of more than 300 brands and its more than $800 million in debt were cited as key problems that triggered its decision to cease clothing manufacturing and shed more than 1800 workers.
Mr Moore was unable to be reached yesterday. Pacific Brands did not respond to requests for more information on its executive bonus schemes.
