Wallace started at Qantas just as simmering problems were about to boil over.
Short-term incentives are now on hold for all executives as the airline is mired in controversy.
It allegedly sold tickets on “ghost flights” and lost a high-profile court case for the way it sacked staff during the pandemic. It is also under fire for high fares as it makes record profits and executives have been judged at zero out of a possible 20 per cent for customer satisfaction.
Former chief executive Alan Joyce is now at risk of forfeiting $14.4 million of his $21.4m payday for the 2023 financial year.
The airline’s board - itself under fire with calls for its chairman to resign - says it is worried about the acute loss of trust from the community, and accumulated disappointment from customers.
It said that much of the loss of trust stems from allegations by the Australian Competition and Consumer Commission that it sold tickets on flights it knew wouldn’t take off.
‘’ We recognise the important role of the ACCC and the company has cooperated fully with its investigations, which only crystalised into material allegations when legal action was announced on August 31,’' it said.
‘‘These allegations are concerning and have the board’s full attention. The legal process now under way limits what we can say for the time being and we look forward to the opportunity to respond properly on the detail of the allegations.
“What we can say is that Qantas’ longstanding practice is that when a flight is cancelled customers are offered an alternative flight or a refund.”
The board said it understands’ shareholder and community concerns about the ACCC allegations coincided with “significant” executive pay outcomes.
It has cut short-term incentives for senior executives for the 2023 financial year by 20 per cent in recognition of the customer and brand impact of cumulative events.
“As part of good governance, after applying the 20 per cent reduction the board will withhold the balance of the FY23 short-term incentive for senior executives while this matter progresses.”
There were already clawback provisions on significant amounts of remuneration awarded but not yet released that would be used if significant misconduct was ultimately found.
In respect of Joyce’s remuneration, in addition to $2.2m in short-term bonuses that have been withheld, a further $8.3m of a total adjusted $21.4 million is subject to clawback should the board determine that necessary.
“When combined with additional long-term incentives already granted, a total of $14.4m is subject to malus (the return of performance-related compensation as a result of the discovery of a defect in performance) and clawback if considered necessary.”
Joyce left the company two months before his scheduled departure.
The airline statement says a scorecard that determines short-term incentive payments has a number of financial and non-financial measures, including safety, customer satisfaction, and emissions reduction.
Importantly, operational safety performance remained strong in a year when the group doubled the number of passengers it carried to 46 million. The airline bettered net emissions reduction target by 3 per cent. And Qantas was more punctual than its major domestic competitor for 11 out of 12 months.
While customer satisfaction levels improved during the year, they are well below where they should be.
“As a result, this part of the scorecard was judged at zero out of a possible 20 per cent and this had a corresponding impact on senior executive pay.”
The board has significantly increased the weighting on customer outcomes for remuneration in the current financial year and introduced it as a metric on future long-term incentives.
“While there is much work to do right across the group, we can’t lose sight of the many positives. This includes the fact we are tackling the current challenges with strong financial foundations, in stark contrast to the past few years, giving us the ability to invest in customers, new aircraft and more people.”
