AUSTRALIAN Wool Innovation’s board has effectively added at least $400,000 to its future annual salary budget with the appointment of former chief executive officer Stuart McCullough to a new overseas marketing position.
In Senate Estimates yesterday, AWI chairman Jock Laurie said Mr McCullough as the company’s new chief marketing and innovation officer based overseas would get a ”reduced package”, but a wage equivalent to his former CEO salary.
However, Mr Laurie said Mr McCullough would not receive the annual short-term performance incentives that have represented 15-20pc of his package and totalled $50,000-$60,000 annually.
AWI still has to appoint a replacement for Mr McCullough in the CEO role, currently filled by the former chief of operations John Roberts.
Mr Laurie also told the Regional and Rural Affairs and Transport Legislation committee that Mr McCullough’s new package would include “tax implications” costing $25,000 and an overseas cost of living component of $40,000.
In 2017, Mr McCullough declared to Senate Estimates that he earned $420,000. AWI today would not disclose what Mr McCullough earned last year or give a breakdown of the short-term and long-term performance incentives available to him since at least 2012. He is employed in the new position with an open contract.
However, a short-term performance incentive of 15pc equals $55,500 for a $370,000 salary, which with the addition of $65,000 in overseas tax and cost of living components would bring the estimated total salary, less the incentive, to $435,000. Mr Laurie said Mr McCullough would also be given assistance with relocation, but AWI had no quotes as yet.
Mr Laurie was not asked if Mr McCullough’s position would involve additional support staff or new office expenses.
The AWI chairman told Nationals Senator Perin Davey and the RRAT committee that AWI had “depowered” its overseas offices during the COVID-19 pandemic.
“So this role is basically sitting in there and covering off on all of those roles that we had.
“It’s about repowering when we’ve depowered it over the COVID period.”
Mr Laurie said AWI’s existing international consultants would be maintained, but he expected the new CEO “to put their stamp on what structure they want,” including looking at all AWI’s overseas positions.
Despite the maintenance of the consultants and that Mr McCullough’s new wage would be additional to the cost of the COO and the new CEO position, Mr Laurie told Senator Davey that the company’s executive salary budget is “certainly not going up at this stage.”
“There has been no new people going into any new role, we’ve shipped people around to focus on the issues that are there, so it won’t be going up at this stage.
“The role of the new CEO will obviously put a structure in place and they will have a look at, I would presume, all of the roles across the senior executive to see if they fit into where they want to go.”
According to AWI’s 2020-21 annual report, the company spent almost $700,000 on two senior staff members in European programs, including $359,514 to Fabrizio Servente for Italian industry strategic planning and $229,145 to Peter Ackroyd for international fibre advocacy. Under the project title of EU communications framework, AWI last financial year also outlayed $355,408 to the Brunswick Group LLP, Eco-Age and Jessica Simor.
The annual report also shows that AWI paid $2,037,176 in short-term employee benefits to key management personnel last financial year, down from $2,197,695 the previous year.
No executive search or interview process for new job
Mr Laurie initially disagreed with Labor senator Glenn Sterle that Mr McCullough had been moved sideways without an executive search and interview process, but later told Senator Sterle and the committee that the AWI board put Mr McCullough into the new position without conducting that procedure.
“No, they did not, and what we did was move a person that we thought had all the skills that we wanted over there and obviously when there is a new CEO in the role they will obviously determine what structure they want and they will be talking with the board about that.”
The AWI chairman said it was common practice for AWI to put people from within the company into positions without an executive search and interview process.
“Yeah, it is, we’ve moved quite a few people around into different roles, moved them into their skill area in different roles, and that’s been done by the CEO on a regular basis.
“I mean we can identify people with talent that fit into a specific area and we can get them into there and then be able to utilise their skills, so this is not unusual.”
Mr Laurie said Mr McCullough had been overseeing and managing international marketing for AWI for a period of time, but AWI had downsized this area during the COVID-19 pandemic and now needed to “up the ante”.
Mr Laurie said he had asked Mr McCullough, with his “intellectual property”, skills and understanding of the issues needed to spend 100 percent of his time on international marketing, rather than the 20pc he had spent on it in the CEO role.
The AWI chair said Mr McCullough’s purpose would be to pull wool through the system, identify any issues and problems, define product development, and get more cohesion and clarity around marketing opportunities and the legislative risk around the European Product Environmental Footprint labelling process.
Mr Laurie would not comment on whether Mr McCullough’s new role is a promotion, a step sideways or a demotion in terms of remuneration.
“I think it is a very important role.
“The separation of the two roles provides opportunities for us to focus on the things that are really important, there is no doubt about that.
“We’ve got to strengthen our stakeholder stuff that allows that to happen and we’ve got to be in a position where we are driving the market,” he said.
“So he doesn’t have the title of CEO anymore, he’s got a title of sort of marketing and product development manager.”
Mr Laurie said Mr McCullough now doesn’t have the same package that he had as CEO.
“He has a reduced package and that would be as you would expect when you’ve got him going out into that role.”
McCullough to be potentially based in London
Mr Laurie said Mr McCullough has already started in the role and would be relocating early next year. AWI is thinking of basing him in London to allow access to the markets.
The AWI chairman said the American, China and European markets will be critical to the industry and AWI needed “really clear advice” about where the opportunities are coming out of COVID. AWI needed people with an understanding of the wool industry to identify product development opportunities, but AWI is not sure how the market will come out of COVID, Mr Laurie said.
Mr Laurie said the board was prepared to give Mr McCullough an equivalent salary to his CEO wage, with some considerations around tax and cost of living.
“The tax implications are about $25K and the cost of living difference is about $40K, so we understand those two figures clearly.
“The costing for his wages is the same, the two figures I’ve just quoted you are the tax implications and the cost of living changes.”
“I mean basically he’s getting his normal wage so that’s already in the budget,”
Mr Laurie said Mr McCullough in his new role would not get the short-term incentives that the CEO would get, stating that this would be “a reduction of about 10-15pc.”
He said the short-term incentives are a performance-based assessment by the board of his work in the previous 12 months.
“The short-term incentive was worth anything up to I think 15pc or more, 20pc, of his package.”
“In dollars, 15pc would represent approximately say $50,000-$60,000,” Mr Laurie said.
“I think it was possible year-in year-out, it was an assessment done an annual basis.”
Mr Laurie said the details of Mr McCullough’s total wages would be available now, but after company secretary Jim Story said this “wouldn’t necessarily be a disclosure item in its own right Senator, it would be in the annual accounts,” the chairman said the details would be reported in the auditor’s report. However, the remuneration of AWI’s key management personnel is not disclosed in the 2020-2021 annual report.
McCullough needs to be embedded in markets
When asked by Senator Glenn Sterle if the new role could be performed by someone else in Australia, Mr Laurie said Mr McCullough had previously done a lot of international travel and needed to be embedded in the markets to “get a gut feeling about what’s happening in those markets.”
“I know from his experience in the wool industry that he can then supply that information back to us.
“My view is that it is an opportunity for him to really sharpen the focus of our international offices and can do that operating locally, I don’t think that we can be complacent at all in this very competitive market, we need to drive this very very hard,” Mr Laurie said.
“So therefore having him embedded in that market and operating and managing very clearly first-hand, in my view is an important way of really progressing this.”
Mr Laurie confirmed the former chief of operations John Roberts would be interim CEO, and he presumed the new AWI board, after the 2021 election in November, would put in place a clear process to appoint a new CEO. He conceded that it was normally a CEO’s role to appoint senior staff members subject to board approval.
“I think the view of the board was that we couldn’t be losing any time with economies opening up around the world and we needed to really get somebody in there operating now which is what we are doing.”
“They are talking 3-6 months before you can get a CEO into the role on a permanent basis and our worry was that we don’t want to have him sitting there for a while and not having things going.”
Former AWI chair Colette Garnsey, who has refused several requests to attend Senate Estimates hearings got a mention yesterday, with Senator Sterle telling Mr Laurie: “It’s a shame your predecessor could never find the time to come to Senate Estimates, but I know you have, so that’s a plus,” with murmurs of agreement from committee chair Senator Susan McDonald.