Why succession planning is the most important lesson in the Australia Post scandal


Yesterday, Australia Post CEO Ahmed Fahour tendered his resignation amid alleged political pressure over his generous pay packet. While the thunder over high CEO pay rumbles on behind this step down, the question for the organisation now is: who’s going to take over and was there succession planning? 

The scandal over the $5.6 million salary package paid to Ahmed Fahour, CEO of Australia Post, a publically-owned company, has resulted in his resignation. Fahour says he will step down officially in July this year, leading to questions over Australia Post’s succession planning. 

After Australia Post attempted to conceal Fahour’s salary, claiming it would result in “unwarranted media attention”, a Senate committee said knowledge of his salary was overwhelmingly in the public interest, and the details were released. Fahour has also been under pressure over allegations of sanctioned union rorting – reported in The Australian Financial Review.

Prime minister Malcolm Turnbull joined the public in taking issue with Fahour’s salary package, which is 10 times larger than the prime ministerial salary. Across the board, the average pay for those at the top of the corporate ladder is now more than 50 times the average Australian salary.

Fahour has rejected claims that public pressure about his pay resulted in the decision. At a press conference, he said:

“I know some of you think the recent discussions about my pay have precipitated my decision but that is not true. I’ve had a pretty fair innings, it’s time for somebody else to do so. The conversations more recently [about my pay] I’ve taken into consideration [but] it’s time to give somebody else a go.”

Despite the abrupt departure, Australia Post has publicly defended Fahour, stating that Fahour had done an “astounding job in transforming the business”.

“When he started, he was set the challenge to ‘write the next chapter in the history of Australia Post’ — and he certainly rose to that challenge,” said John Stanhope, chairman of Australia Post.

“He led the team that developed an entirely new strategy focused on investing in the parcels and eCommerce business. It was the right strategy. It has put Australia Post on a pathway to a sustainable future and avoiding a taxpayer bailout,” said Stanhope.

Speculation on the next Australia Post CEO

While the Australia Post board had previously set the chief executive’s salary independently, the Turnbull government has now given the Independent Remuneration Tribunal oversight of the chief executive’s salary and conditions.

Stanhope has said that the Board would begin the search for a new CEO immediately. They will consider both internal and external candidates – and are expecting to announce a successor in the coming months.

However, a CEO’s sudden departure can have results more far-reaching than a lengthy (and unforeseen) recruitment process. For publicly-listed companies, the news can stoke investor anxiety, send shares plummeting and create an atmosphere of uncertainty within the organisation.

And because CEOs are leaving organisations (under both good and bad circumstances) with increasing frequency, company executives need to be prepared for a departure before it’s announced.

According to a PriceWaterhouseCooper study conducted in 2015, leading Australian companies were subject to approximately 35 per cent more CEO turnover events than global leading enterprises. They also estimate that unplanned CEO turnover costs Australian shareholders $8 billion a year.

The result has been a growing argument within the business community for a company contingency plan that goes beyond a strong succession plan; an emergency succession plan.

“When planning succession, Australian boards must institutionalise the process, factor in the advantages of diversity, and take formal steps to increase CEO tenure – or risk becoming poor prospects to local investors compared with better prepared Global leading institutions,” says strategy partner and report coauthor Varya Davidson.

“These decisions at board level are critical. Boards must be proactively involved in CEO succession planning and ensure that the markets are aware of their intentions and visibly show that they are not surprised into forced action.”

David Nosal, founder, chairman and CEO of a San Francisco-based executive search and development firm, agrees.

“For a smooth transition to take place in the aftermath of a CEO departure, there already needs to be a common vision, clear goals as well as a solid strategy in place when the CEO is still with the company.”

A CEO’s departure is also an opportunity to reflect on how to improve leadership.

Liberal Senator James Paterson, who chairs the committee that forced Australia Post to reveal Fahour’s salary, said: “Ahmed Fahour’s resignation gives Australia Post the opportunity to reset its executive remuneration policies and adopt a new approach to transparency.

The question remains whether the company has a solid and dynamic succession structure in place that will allow it to continue to innovate and profit – as well as rectify the errors that have tarnished its public reputation.

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Max Underhill

The article highlights a number of issues and questions: 1. If Australia Post had placed the HR asset value had been on the balance sheet (even as a BS Note) would it have addressed the issue before we had reached this point. We believe it would have at least gone someway to making the CEO accountable; 2. The lack of position evaluation (old Job Evaluation) in Australia is allowing for massive distortion of salaries. The critical valuation needs to be the base salary – the value of the contribution of the position. This is the starting point of the remuneration… Read more »

Max Underhill
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Max Underhill

Thank you for the 3 direct feedbacks; one feedback indicated that the last “job evaluation” carried out was just after the strawberry hill mail centre set up in mid 1990’s. Would that be right?

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Why succession planning is the most important lesson in the Australia Post scandal


Yesterday, Australia Post CEO Ahmed Fahour tendered his resignation amid alleged political pressure over his generous pay packet. While the thunder over high CEO pay rumbles on behind this step down, the question for the organisation now is: who’s going to take over and was there succession planning? 

The scandal over the $5.6 million salary package paid to Ahmed Fahour, CEO of Australia Post, a publically-owned company, has resulted in his resignation. Fahour says he will step down officially in July this year, leading to questions over Australia Post’s succession planning. 

After Australia Post attempted to conceal Fahour’s salary, claiming it would result in “unwarranted media attention”, a Senate committee said knowledge of his salary was overwhelmingly in the public interest, and the details were released. Fahour has also been under pressure over allegations of sanctioned union rorting – reported in The Australian Financial Review.

Prime minister Malcolm Turnbull joined the public in taking issue with Fahour’s salary package, which is 10 times larger than the prime ministerial salary. Across the board, the average pay for those at the top of the corporate ladder is now more than 50 times the average Australian salary.

Fahour has rejected claims that public pressure about his pay resulted in the decision. At a press conference, he said:

“I know some of you think the recent discussions about my pay have precipitated my decision but that is not true. I’ve had a pretty fair innings, it’s time for somebody else to do so. The conversations more recently [about my pay] I’ve taken into consideration [but] it’s time to give somebody else a go.”

Despite the abrupt departure, Australia Post has publicly defended Fahour, stating that Fahour had done an “astounding job in transforming the business”.

“When he started, he was set the challenge to ‘write the next chapter in the history of Australia Post’ — and he certainly rose to that challenge,” said John Stanhope, chairman of Australia Post.

“He led the team that developed an entirely new strategy focused on investing in the parcels and eCommerce business. It was the right strategy. It has put Australia Post on a pathway to a sustainable future and avoiding a taxpayer bailout,” said Stanhope.

Speculation on the next Australia Post CEO

While the Australia Post board had previously set the chief executive’s salary independently, the Turnbull government has now given the Independent Remuneration Tribunal oversight of the chief executive’s salary and conditions.

Stanhope has said that the Board would begin the search for a new CEO immediately. They will consider both internal and external candidates – and are expecting to announce a successor in the coming months.

However, a CEO’s sudden departure can have results more far-reaching than a lengthy (and unforeseen) recruitment process. For publicly-listed companies, the news can stoke investor anxiety, send shares plummeting and create an atmosphere of uncertainty within the organisation.

And because CEOs are leaving organisations (under both good and bad circumstances) with increasing frequency, company executives need to be prepared for a departure before it’s announced.

According to a PriceWaterhouseCooper study conducted in 2015, leading Australian companies were subject to approximately 35 per cent more CEO turnover events than global leading enterprises. They also estimate that unplanned CEO turnover costs Australian shareholders $8 billion a year.

The result has been a growing argument within the business community for a company contingency plan that goes beyond a strong succession plan; an emergency succession plan.

“When planning succession, Australian boards must institutionalise the process, factor in the advantages of diversity, and take formal steps to increase CEO tenure – or risk becoming poor prospects to local investors compared with better prepared Global leading institutions,” says strategy partner and report coauthor Varya Davidson.

“These decisions at board level are critical. Boards must be proactively involved in CEO succession planning and ensure that the markets are aware of their intentions and visibly show that they are not surprised into forced action.”

David Nosal, founder, chairman and CEO of a San Francisco-based executive search and development firm, agrees.

“For a smooth transition to take place in the aftermath of a CEO departure, there already needs to be a common vision, clear goals as well as a solid strategy in place when the CEO is still with the company.”

A CEO’s departure is also an opportunity to reflect on how to improve leadership.

Liberal Senator James Paterson, who chairs the committee that forced Australia Post to reveal Fahour’s salary, said: “Ahmed Fahour’s resignation gives Australia Post the opportunity to reset its executive remuneration policies and adopt a new approach to transparency.

The question remains whether the company has a solid and dynamic succession structure in place that will allow it to continue to innovate and profit – as well as rectify the errors that have tarnished its public reputation.

2
Leave a reply

avatar
100000
  Subscribe to receive comments  
Notify me of
Max Underhill
Guest
Max Underhill

The article highlights a number of issues and questions: 1. If Australia Post had placed the HR asset value had been on the balance sheet (even as a BS Note) would it have addressed the issue before we had reached this point. We believe it would have at least gone someway to making the CEO accountable; 2. The lack of position evaluation (old Job Evaluation) in Australia is allowing for massive distortion of salaries. The critical valuation needs to be the base salary – the value of the contribution of the position. This is the starting point of the remuneration… Read more »

Max Underhill
Guest
Max Underhill

Thank you for the 3 direct feedbacks; one feedback indicated that the last “job evaluation” carried out was just after the strawberry hill mail centre set up in mid 1990’s. Would that be right?

More on HRM