It has been widely reported that the Myer department stores, Coles Myer’s problem child, reported a 46% drop in earnings for the year ended 30 June 2005 to $39 million. These numbers were made to look even worse when rival, David Jones reported EBIT of $78 million (an increase of 19% on the previous year) and sister company Target delivered a 47% surge in earnings.

Despite this abundantly poor performance, Myer managing director Dawn Robertson still managed to take home a very handsome $2.68 million in 2005, effectively making a mockery of Coles Myer’s claim in its 2005 Annual Report that the company seeks to “align executive reward and performance with the creation of value for shareholders.”

Looking more closely at Robertson’s remuneration for 2005, her total compensation included short-term performance-based payments of $377,408 and non-monetary payments of $432,034. One must question exactly why an executive who presided over a business whose earnings dropped by almost 50% would be entitled to any amount of bonus based on “operational performance.” Let alone a bonus which amounts to more than seven times the average Australian annual wage. Coles Myer shareholders would presumably wince at the thought of having to pay Robertson’s “performance bonus” if she actually managed to improve Myer’s performance.

Aside from the fact that Robertson received a “short-term” payment while her business performed terribly, the Myer chief also notionally received $362,823 in equity (based on the value of the options she received in 2002). Such a payment also flies in the face of Coles Myer’s claim that it aligns executive reward with shareholder value.

If Coles Myer was serious about linking remuneration to shareholder value they should have linked Robertson’s remuneration with the performance of Myer on a stand-alone basis, rather than a collection of business which she has absolutely nothing to do with. Providing Coles Myer options to Robertson means that regardless of how poorly she performs at Myer, so long as K-Mart, Target, Officeworks and Coles perform well Robertson will receive additional compensation by exercising her options and selling the resultant shares.

In the past three years, Robertson has received remuneration of more than $9 million – despite leading Myer to woeful underperformance compared not only to its main rival David Jones, but also to Coles Myer stable mates, K-Mart and Target and even Myer itself (which in 1999 earned $122.1 million and in 2000 earned $148.4 million).