One of the great things about annual general meetings in Australia is the ability for shareholders to assess, and if they see fit, to vote against the pay packets of the top brass at the companies they invest in.
A useful resource in keeping an eye on such things is the Australian Shareholders Association, which monitors a swathe of companies and publishes their voting intentions before heading along to meetings.
And it's fair to say they're none too keen on the remuneration settings over at gambling giant Tabcorp Holdings Ltd (ASX: TAH), where they've run the numbers and come up with some figures they reckon are out of whack with shareholder expectations.
Image source: Getty Images
Massive pay packet is on the nose
The ASA has singled out the company's long-term incentive settings as particularly egregious, saying the use of options is not in line with what they consider best practice, because "their pricing is opaque and can result in outlandish payouts well in excess of the ordinary shareholder's experience".
In the case of the Tabcorp Chief Executive Gillon McLachlan – previously the head honcho at the AFL – there are 30 million options available to be granted, with a strike price of 47 cents.
As the ASA explains:
So, in 2027, if earnings before interest and tax is up by about 10% and the share price trades at current levels ($1.07 on 10/10/2025), this would result in a bonus cash payment to Mr McLachlan of $18 million. By way of comparison, Tabcorp's statutory net profit this year was around $36 million. This illustrates the leveraged nature of options and the disconnect between executive and shareholder experience.
The ASA further points out that the options do not even need to be exercised, as well as the shares issued, "rather they are simply a basis for calculations to enable cash payments to be made to executives''.
This approach also fails to promote the accumulation of skin-in-the-game shares by executives which conventional schemes achieve.
The ASA will be voting against Mr McLachlan's options package when it comes up for a vote at Tabcorp's annual general meeting, to be held on Monday, 20 October.
They're also going to vote against the remuneration report on Monday, saying it does not meet their standards "on several measures", including the use of options.
In Mr McLachlan's defence, the company has returned to profit, albeit modestly, under his leadership, and the shares are up more than 100% over the past year.
We'll have to wait and see what other shareholders think when they vote on Monday.
