Infant formula marketer a2 Milk has quietly moved to close off a loophole that allows chief executives to sell shares soon after their appointment.
The company today appointed HanesBrands executive David Bortolussi as its next chief executive, on an annual salary of AU$1.75 million, plus share incentives.
Bortolussi, an Australian, replaces interim chief executive Geoff Babidge, who took over from Jayne Hrdlicka, who left the job after less than 18 months in the top job last December.
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Early in her tenure, Hrdlicka bucked convention by controversially selling a2 Milk shares vested with her.
In releasing details of Bortolussi's package, a2 Milk said: "Other than to meet any tax obligations, no shares held by David can be sold until David holds sufficient shares to meet the company's minimum shareholding requirement."
Late last year, a2 Milk introduced a minimum shareholding requirement (MSR) policy to apply to the managing director and chief executive.
"The purpose of this MSR policy is to strengthen the alignment between the interests of executives and the interests of shareholders and encourage a focus on building long-term shareholder value," the company said at the time.
Executives are now required to acquire and hold a minimum shareholding equivalent to 100 per cent of their fixed annual remuneration comprising base salary and compulsory employer superannuation contributions before any tax or social security deductions.
"Executives are expected to achieve the MSR by the end of five annual vesting periods for long-term incentive grants, unless they have been the beneficiaries of earlier option plans," it said.
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A2 Milk recognised that, from time to time, it would be necessary for executives to sell shares to meet personal financial commitments but that any such activity would always need to comply with its securities trading policy.
Babidge, who is credited with turning the alternative milk company into today's multi-billion-dollar operation, previously ran the company from 2010 to 2018. He was paid $1.6m to fill the position while a replacement was sought.
Oyvinn Rimer, senior research analyst at Harbour Asset Management - which has a stake in a2 Milk - said the package was not too dissimilar from previous packages, although the base salary was a little higher.
On executive share sales, Rimer said: "They have closed some of the loopholes that were problematic in the past," he said.
"So in that sense it would not be expected that we are going to see the chief executive sell stock any time soon," Rimer said.
Craigs Investment Partners, in a research note, said the share trading restriction was "helpful".
Bortolussi's most recent role was group president - International Innerwear, HanesBrands.
He joined Pacific Brands in 2009, initially as chief financial and operating officer, taking over as CEO in 2014, during which he restructured and transformed the business.
He had previously spent five years at Foster's Group, where he held the role of chief strategy officer responsible for corporate strategy, mergers and acquisitions.
Chairman David Hearn said the search for a new CEO had been exhaustive, covering three continents. The task was made more complicated by the Covid-19 pandemic.
Eventually the board reached a "medium" list of just under 10 candidates.
"It's been an extremely long search because we have been extremely thorough," he told the Herald.
He said the board sought three specific qualities in its search for a new CEO.
"We wanted somebody who had really deep operational and executional experience because we are going through a period now of real execution," he said.
"We have now got to deliver a strategy that has been worked out. That's clear."
"He (Bortolussi) is a clear, strategic thinker.
"He knows how to develop businesses and to think through the best opportunities to develop strategies for the benefit of shareholders.
"The second thing that we wanted was somebody who understood brands," he said.
"He took Hanes from being a wholesaler of underwear - selling to intermediaries - and made it a brand business - continuing its own destiny," he said.
"He's the guy who really pushed the value creation that was possible with the brands in the business that were not really being exploited."
Bortolussi had the "strategic nous to develop the brands and value".
Thirdly, the board wanted a team player.
"It's a collegial company in the management and within the board, and we wanted somebody who would absolutely fit in with that," he said.
"David has that characteristic deep in his DNA."
Hearn also stressed Bortolussi's experience in China, which has been a2 Milk's main engine for growth.
While at Hanes he was responsible for moving all manufacturing to China.
Unlike Hrdlicka, who lived in Melbourne but who commuted to Sydney while at a2 Milk, Bortolussi will be shifting from Melbourne to Sydney.
Bortolussi is expected to commence in the role early in the 2021 calendar year.
A2 Milk, which is due to report its annual result on August 19, last traded at $20.68, down five cents from Monday's close.