While we often focus on executive excess and the all-too common scenario of shareholders not getting value for money from their well-paid CEOs, there are also instances of Australia’s senior executives who have excelled at allocating capital on behalf of shareholders. Today, we list Australia’s five best-value chief executives — funnily enough, most of them aren’t paid anything like the remuneration received by Marius Kloppers, Tom Albanese, Wal King or the heads of the banking oligopoly.
1. Sally MacDonald — Oroton
There is no better advertisement for women in the executive suite than Oroton boss and mother of three, Sally MacDonald. MacDonald, a Melbourne-raised Harvard graduate, who once worked at Boston Consulting Group, took over running Oroton from Ross Lane in 2006 after the company had announced a $9.4 million loss. Lane, whose family created Oroton in 1938 continued as executive chairman.
Under MacDonald’s stewardship, Oroton’s share price has risen from $1.80 to $8.04 — an increase of 346%. Oroton (which also owns the Polo Ralph Lauren licence in Australia as well as its own Oroton-branded stores and products) generates a return on equity of 83% (up from from less than 30% when MacDonald arrived), almost unheard of in any sector, let alone a retail business. By comparison, even the rejuvenated Myer department stores has been able to generate a return-on-equity of 11%.
Despite her outstanding success, MacDonald was paid a relatively miserly $1.04 million last year, again indicating that the very best executives also tend to be the least greedy.
2. Andrew and Paul Basset — Seek.com
The founders of Seek.com, former lawyers Andrew and Paul Basset have guided their online jobs directory to become a global $2.5 billion Goliath. Revenue has risen from $39 million in 2004 to $281 million last year, while profit has increased by more than 400% to $89.5 million. Best known for its ubiquitous jobs directory, Seek has also made an impressive foray into the education sector, with its learning business generating net profit of $24 million last year, up from only $1.5 million in 2006.
Seek’s share price has risen from $2.40 in 2005 to $7.40 now, while the company maintains a solid return on equity of 27%. The Bassets received only $1.2 million salary last year for their efforts in guiding Seek. In October, Paul Basset announced his retirement as joint CEO, with Andrew Basset becoming sole chief executive of the business.
3. Brian McNamee — CSL
Under the stewardship of Brian McNamee, CSL has been one of Australia’s truly great international companies. CEO since 1990, McNamee has overseen CSL’s transition from a private Australian-based company to a global medical giant.
Floating in 1994 for $2.30 a share (or 76 cents after adjusting for its 3:1 share split), CSL’s share price is now $34.27 — a remarkable gain of more than 4000%. CSL has been one of the few Australian companies (along with Westfield, NewsCorp and Visy) to successfully expand internationally with its takeovers of Swiss-based ZLB Bioplasma AG in 2000 and German Aventis Behring in 2004. Despite the acquisitions, CSL has managed to increase return-on-equity from 17% in 2005 to almost 25% now.
McNamee sold part of his stake in CSL for $17 million in 2005 and a further $8 million worth of shares in March this year. His remuneration of about $6 million annually (which is the highest of this list) is paid partially in cash and the remainder in performance rights and options.
4. Bernie Brookes — Myer
While Myer has bee criticised for its share-price performance since its 2009 float, many forget that Brookes took the helm back in 2006 after the disastrous reign of Dawn Robertson (Robertson was paid more than $18 million to run Myer over three years) when Myer was sold a private equity consortium led by TPG.
Brookes immediately cleared hundreds of millions of dollars of old stock and sold Myer’s iconic Melbourne CBD store to pay down debt. Myer’s EBIT has increased from $165 million in 2007 to $270 million last year, while its margins have increased from less than 2% to more than 8% in 2010.
While Brookes stands to make upwards of $70 million at Myer (and was paid $5.4 million last year), that is largely due to Brookes’ substantial initial investment in the group (Brookes also held onto his stake in the company when it floated, unlike TPG which sold its entire holding). Had the Brookes-led Myer failed, he would have faced serious personal financial hardship having mortgaged his house to take an equity stake in the privately owned vehicle.
5. Chris Roberts — Cochlear
Like McNamee at CSL, Chris Roberts has led Cochlear to global dominance of its sector with a near 70% market share for Cochlear implants. Since his appointment as CEO in 2004, Cochlear’s share price has appreciated from $22 to $73, while profit has risen from $36.8 million to $155.2 million — an increase of more than 300%. Once part of the Pacific Dunlop conglomerate, Cochlear was spun-off in 1983 and the struggling Pac Dunlop sold off its stake in the company in 1996 when Cochlear floated on the ASX.
Under Roberts’ stewardship, Cochlear’s return-on-equity has increased from 26% to 35% and the company now employs more than 2000 staff. Roberts’ remuneration is a relatively miserly (in CEO terms) $2.1 million.
*Adam Schwab is the author of Pigs at the Trough: Lessons from Australia’s Decade of Corporate Creed (Wiley, 2010).
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