19 July 2024
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Woolies boss could lose a million

Peter Switzer
9 July 2024

The pandemic-created inflation has not only brought with it a cost-of-living impost on those on low incomes, those over-borrowed and people running businesses in a new workplace expectation about working from home, it has also made life costly for CEOs of big companies.
Ex-Qantas boss Alan Joyce has been accused of a litany of issues that could threaten his final exit pay, while Woolworths’ outgoing CEO Brad Banducci could be kissing goodbye a cool million of his pay cheque because his contract had a clause that linked his departure payout or long-term bonus to the company’s reputation.
The guy in question is a highly regarded CEO, who made his name building up Dan Murphy’s, which shows that there was a time he was in the business of price competition, which benefitted the hip pockets of Australian consumers.
However, in a post-pandemic world with 7%+ inflation and 13 rate rises, both Joyce and Banducci have been accused of being price gougers by all and sundry, but especially by PM Anthony Albanese, his opposite number Peter Dutton and the Greens.
The SMH’s respected business columnist Elizabeth Knight explained how Brad’s ‘bad boy’ behaviour on prices (and his defiant attitude at a Senate hearing investigating pricing by supermarkets) damaged his and Woolworth’s reputation.
At that hearing in April, Greens senator Nick McKim threatened to hold outgoing Woolworths chief executive Brad Banducci in contempt for refusing to directly answer questions about the company's profitability.
This is how Knight saw the incident: “He scored an own goal in the Senate inquiry a few months ago by picking a fight with McKim, who was chairing the show, by refusing to answer a simple request about the company’s return on equity.”
This hurt his credibility and made him look either silly (being a CEO who couldn’t answer an important question about his company) or deceptive!
Either way, it wasn’t good for his reputation or that of Woolworths. Knight says the AFR has received a leak that the company paid to assess Woolies reputation says “…that in two years Woolworths has gone from the seventh most reputable brand to the 42nd.”
Banducci’s final pay-off is 20% dependent on this reputation reading. The rest is linked to total shareholder return and return on funds employed. Even here, the political furore over price gouging and its link to inflation and no interest rate cuts to date, means big businesses such as Woolies, Coles, Qantas and others are seen as contributors to the cost-of-living crisis and their share prices have fallen.

Woolworths (WOW)

(Interestingly, lately Woolworth’s share price has recovered to a degree, which was driven by bargain hunters. But that fall from $37.51 at the start of the year to $30.50 in early May, was largely down to the politicizing of price gouging and Banducci’s own poor public performances.)
By the way, even if Banducci has been slugged more heavily than he would have been if there hadn’t been a pandemic and persistent inflation, the practices of big supermarkets, especially when it comes to small suppliers and retail rivals, haven’t been exemplary.
For those who have suffered at the hands of big businesses, this era of greater scrutiny of CEOs with the public prosecutions that ultimately hit a CEO’s remuneration, must be seen as an overdue payback.

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© 2006-2021 Switzer. All Rights Reserved. Australian Financial Services Licence Number 286531. 
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