Qantas cuts former CEO’s pay after damaging governance report

By Byron Kay and Risha Chatterjee

Australia’s Qantas Airways said it has cut its former chief executive’s exit bonus by A$9.3 million ($6 million) after an external review found he was responsible for actions that alienated travellers, staff and shareholders in the Covid era and beyond.

The decision marks a dark note on the 15-year reign of Alan Joyce at Australia’s dominant airline, who brought forward his retirement to last September under a cloud of lawsuits alleging unfair dismissals due to the pandemic and the selling of tickets for cancelled flights.

Qantas has been one of Australia’s top brands for years, even with Joyce’s penchant for controversy. In 2011, it grounded its entire fleet over a union dispute, but the 2020 sacking of 1,700 ground staff while collecting Covid stimulus payments, followed by a surge in flight cancellations and lost baggage once Covid border restrictions were lifted, has prompted analysts to warn that the cost of repairing the airline’s reputation could hurt profits.

Joyce’s final compensation totalled A$21.4 million including bonuses, but the company said at the time it reserved the right to withhold some of the amount pending an external review of how the airline, which sells nearly two-thirds of domestic fares in Australia, is run.

Qantas published the review on Thursday, which blamed the company’s reputational crisis on a “command and control” leadership style, and said it had cut Joyce’s final package to just over half the original amount.

“There was a great deal of respect for a long-term CEO who had weathered and navigated several previous operational and financial crises,” said the report, prepared by Tom Saar, a senior adviser at McKinsey & Co.

“Qantas had a ‘command and control’ leadership style with centralised decision-making and an experienced and dominant chief executive,” the report added.

“This contributed to a top-down culture that impacted on employee empowerment and willingness to challenge troubling decisions. This cultural trait formed the basis for some of the events that affected the group’s reputation.”

The report noted that Qantas’ board had “limited visibility or appreciation of the manifestations of this cultural trait”, adding that the company had already replaced some directors and senior managers.

The report said the company is also working to recalibrate its relationships with external stakeholders, in light of the “hostile approach” under Joyce’s leadership.

The report said the airline had introduced a more stringent internal approval process for CEO share sales, noting that Joyce’s sale of A$17 million worth of Qantas shares in June 2023, just months before his scheduled retirement, had contributed to a loss of confidence among stakeholders.

Qantas in May agreed to pay A$120 million to settle a lawsuit brought by a regulator over the sale of thousands of tickets on flights that had already been cancelled.

The airline, which will announce its annual results on August 29, is still waiting to find out how much it must pay after losing a separate lawsuit that found it unlawfully dismissed 1,700 ground staff in 2020 to prevent them from taking industrial action such as strikes.

($1 = 1.5349 Australian Dollar)