You get the managers that you deserve. Well, that appears to the case for Australia’s national airline, Qantas.

At Qantas’ annual general meeting in Perth yesterday, 43% of shareholders voted against the company’s non-binding Remuneration Report. While the opposition was relatively high (and under the Productivity Commission’s Draft Report, it would count as a second strike after 40% of shareholders rejected last year’s report) — the question arises: how could 57% of Qantas shareholders possibly support its remuneration practices?

If there were a gold medal for designing the worst possible remuneration structure, the Qantas board, led by former chairwoman Margaret Jackson, would be climbing the dais. Former CEO Geoff Dixon led Qantas for almost ten years. During that time, according to Qantas’ 2008 annual report, the company’s returns were lower than that of the global airline index. That, however, didn’t stop Dixon being the highest-paid aviation executive in the world (in cash terms) over that period.

Even worse, in 2006, Dixon spent several months secretly plotting with a bunch of investment banks and financial engineers to buy the company from shareholders. As part of the deal, Dixon would have immediately received almost $10 million in incentives and may have garnished almost $100 million had the acquisition been a success. The leveraged buy-out ultimately failed, but Dixon managed to strong-arm former Qantas chair and good friend Jackson (the two famously embraced at the announcement of the private equity bid) into one of the most outrageous remuneration deals paid to any Australian executive.

In 2007, Dixon (and lieutenant Peter Gregg) received millions of dollars in “retention payments”. Even though Qantas’ performance was at best pedestrian, the board felt it necessary to keep Dixon at the helm, at a cost to shareholders of tens of millions of dollars. But that wasn’t enough for Dixon — he also demanded that the Qantas board compensate him for “retrospective changes to superannuation laws” in February 2007.

Those so-called changes did not actually effect Dixon (he was able to avoid any adverse taxation implications) and in any event, his employment contract clearly stated that the company was not responsible for such payments. Nevertheless the Qantas board paid Dixon more than $3 million to compensate for a loss that he never suffered and a payment that he was never owed. In total, for five months work in 2008/09, Dixon took away $10.7 million. In 2007/08, Dixon collected $12.2 million as Qantas’ share price collapsed.

However, all that still wasn’t enough to convince the majority of Qantas shareholders to vote against the non-binding Remuneration Report yesterday. Of course, big Qantas shareholders merely manage other people’s money. Qantas’ substantial shareholders include American fund manager The Capital Group (which holds almost 17% of Qantas), Commonwealth Bank and AXA (former major shareholder Balanced Equity Management is understood to have reduced its interest).

While Commonwealth Bank’s voting patterns are not known — the bank’s chairman is none other than John Schubert, who also happens to be on the board of Qantas.

Currently, shareholders or superannuation investors are not able to determine how institutions vote shares on their behalf. This will hopefully change in the coming year, with one of the lower profile but excellent recommendations made by the Productivity Commission involving the compulsory disclosure of proxy voting by institutions.

The Qantas vote did, however, cast further doubt about the applicability of the commission’s suggested “two strikes” rule. That is because the 43% vote would have led to the entire Qantas board being “spilled” and placed for re-election. The problem is, the person believed to be most responsible for the Dixon payout was Margaret Jackson, who has since departed Qantas (but not before she accused shareholders of having a “mental problem”). While current chair Leigh Clifford poorly explained the rationale for the payment, given he had nothing to do with it, it would be grossly unfair to blame the former Rio strongman for Jackson’s questionable business judgement.

The Qantas 2009 Remuneration Report stands out like a beacon of poor corporate governance. That a majority of institutional shareholders could actually vote in favour of the resolution makes you wonder: exactly who is watching the watchers?