What’s your salary compared to a CEO?

Ross Greenwood speaks to Dominos Chief Executive Don Meij after labor announces, if elected, will legislate to require publicly listed companies to reveal a chief executive-employee pay ratio.

Introduction: What’s your salary compared to a CEO?

Ross Greenwood: Want to take to a really interesting policy by the Labor Party today. They’ve decided as a result of executive pay and questions about it, as to whether, in fact, this should be now a new ratio of credit with company reporting, which basically compares the salaries of the chief executives with the median wage of their workers. As I indicated, there are some issues with this, but a number of organizations have put out their own surveys about this. One is, say, the Australian Council of Superannuation Investors, which is basically a lobby group that agitates for change inside companies.

It says in it’s 2018 report, the chief executive hit record highs, the highest it’s been in 17 years of the study, that the ASX 100 CEO is more likely to lose their job than their bonus. In 2017 all but six of the 80 CEOs eligible for a bonus received one, compared with 10 CEOs departing their roles. Bonus payments of up to 18% and close to one in three ASX CEOs were awarded at least 80% of the maximum bonus in the recent period. Amongst others, the Australian Council of Superannuation Investors are saying, “Well, why don’t we bring this in?.”

Now, you then get the other organizations that might say, for example, have reasonable wages. One of the highest paid in this country is a man who’s helped to create Domino’s Pizza, Don Meij. Now, Don Meij has called on the coalition now to adopt Labor’s plan. That’s the interesting part. Now he, in 2017, took home nearly 37 million dollars, or rather was paid 37 million dollars once the value of shares and equity is counted. He’s on the line right now. Many thanks, Don.

Interview with: Don Meij, CEO, Dominos

Don Meij: Hi Ross. Good evening.

Ross Greenwood: Why are you suggesting that the coalition should adopt Labor’s plan?

Don Meij: I think Ross, the first thing is that we endorse anything that brings transparency inside of business, because the number you just quoted for what I was paid last year is not quite correct.

Ross Greenwood: What is the correct number then Don?

Don Meij: Well, it’s about 10 to 15% of that actually, so rather than going the exact number to the note, I am well paid, so that’s not the purpose of the conversation.

Ross Greenwood: How does the headline come out of 37 million when you’re suggesting the answer is probably more between 3 to 5 million dollars, let’s say?

Don Meij: Well, I think it’s not for us to comment on the organizations that accumulate these reports. As a public company, anybody can go to their annual report, and they can see just like any other public company what the CEO and any of the senior executives earned and you’ll see that it’s nowhere near that, but there are different groups and they have different interests and they analyze things in different ways.

I think the comments that you’re talking about and that we’re actually supporting today is that the transparency, so that these conversations are more objective, so that shareholders can be fully informed, because what ends up happening is people read these newspapers and then special interest groups or organizations that are chasing to change legislation put out information, and it would be great for shareholders to just be able to look, or anybody from the public to be able to look and say, “Hold a second. Let me just quickly go into that website, into that annual report. What did the actual CEO get paid?.”

Then equally as importantly, which is what is being proposed, is that what is the mean of the team members, or what is the average rate of the team members? I think that when you do this, it shouldn’t just be only ASX listed companies, because what’s also really important is Australian companies have to compete, done on a global landscape. We have a lot of global groups that, for example, we’ll have to compete against or private equity groups.

Shouldn’t it be the same for everybody in that environment? What is everybody being paid? We had an award modernization about eight or nine years ago and I’m really proud to say that Domino’s is fully modernized but the large fast food groups that we compete against are not modernized, because they are not public.

Ross Greenwood: Isn’t one of the real issues though there’s all spotlights placed on public companies? Yours has come under some real attention in recent times, in terms of growth rates, expansion rates, all those types of things. They’ve been criticism of the company as to whether it can achieve some of those hurdles. This is another form of, if you like, a light or a torch being shone on your business. In terms of being the chief executive of a company trying to expand it, getting well paid, as you roll out the business, are the incentives for the chief executives in Australia in the right proportion? Are they in the right places?

In other words, are you being rewarded for growing the company very quickly, as distinct from necessarily driving long-term value for the shareholders of which you are one?

Don Meij: Yes, sure and as you know I have been in this business for 31 years. We do, and I do personally think very long-term about our business and where we’re going. It’s not about a single annual result. It’s about the long-term outlook for the business and all of the stakeholders in the business. The most important thing here is, it’s not for me to judge what’s right or wrong. That’s an Australian shareholder view. That’s an Australian public view, but what’s really important is that the public is informed, so that those conversations can be accurate, so that we’re not sensationalizing those conversations.

Here is exactly what the senior management, including the chief executive are paid. By the way, he’s the mean and here’s what the lowest team members in that business are being paid, so that they can be a comparison. For example, in our case, we’re so proud that we’re the highest payers of team members out of all the major fast food companies. Our team members are benefiting from the success of Domino’s and it’s growth.

Ross Greenwood: You got to be comparing apples with apples, because as I pointed out earlier on, if you’re comparing this with investment bankers working for Macquarie also listed, known as the millionaire’s factory, then clearly, the ratio for that chief executive is going to be significantly lower than it might be for somebody such as yourself working in fast food, or somebody who’s working in retail or other parts of their community.

Don Meij: That’s exactly right. That’s why a rational conversation should be around the fact that people looked in sectors. Banks are looked at compared to banks, retailers are looked at compared to retailers, fast food and so on in that sector so that it is compatible. What is happening inside that business and it’s a proper transparent conversation because apples with apples, you can see the data and it’s the factual data. It’s not some schmooze, it’s not some special interest group or some group that’s just trying to rally change, and therefore maybe changing the outlook on how those numbers are being presented.

It’s just the facts. Here they are. This is what team members get paid. This is what the chief executive and other senior executives get paid.

Ross Greenwood: Just one other aspect of it Don. Just tell me about corporate life generally, because as I say, you’re under pressure on a quarterly basis, half-yearly basis, to produce growth results that we actually put forecasts out there. The share price might get punished or might actually get exalted if it goes either over or under those targets you set out, but you set the company, as you say, for very long term. Is it frustrating to you then that you might be judged very harshly in the short term, based on the fact that you’ve got to try and make targets and set targets out for the markets?

Don Meij: When you enter into the public life, once you become a public company executive, you do acknowledge that you can be beat up on short-term and you can be beat up on public interests stories. You just have to live with that because that’s just what happens when you accept that role. For a long-term CEO or any company to thrive, not just survive but thrive, the sort of results we’re delivering today and we’ll deliver in the next six and 12 months, is due to the work that we put in place over the last three, five or 10 years.

If you’re just looking for short-term results, you will get a very short-term leadership team. You will get turnover because you’ll trip and fall. Sometimes you just got to have big shoulders. You’ve just got to tolerate the conversations that are very short-term. There’s all sorts of interest groups in the public market and they’ll be targeting a special interest and as an executive team, and as a group and a board, what’s the right thing? Govern for the long-term success of that business so that it thrives. The investors that understand the investment profile — because there’s all sorts of investment profiles.

If you’re investing in Domino’s Pizza, it’s a long-growth company. It’s got a long track record of growing and for it to continue to grow, we have to continue to think long-term and you’ve just got to be older, have broad shoulders and it isn’t fun. Sometimes your kids come home and they’re reading the papers and it isn’t a fun day, but you’ve just got to have bigger conversations and everybody grows and gets stronger as a result of that.

Ross Greenwood: One final aspect. Do you believe that being the chief executive on the board of a publicly listed company these days is made more complicated by the rise of class actions and by the rise of the continuous disclosure laws, that mean that any slip is examined by a half a dozen legal firms trying to see whether they can take money out of the company?

Don Meij: Definitely, you’re very conscious and we live in a disruptive world and so leadership has to take some risks. If we’re going to go out and create change and create real value for shareholders, you do have to take some risks. You want to do calculated risk. What we have to do is find the right way to take shareholders on that journey when you’re doing those things because ultimately some things don’t work. Many things don’t work and you need to be able to make sure that everybody’s coming for that journey. Surprises always backfire. Unfortunately, we only put in two or three windows a year, so that makes it quite difficult, but there is also lots of laws that ASX put on us that we have to make sure that we can come out and be more transparent if there’s any dramatic change both positive or negative. As long as you are aware of all those things and you’re prepared to weather any of the short-term attacks —

By the way it can be short-term attacks but there can be times when we’re going through so much positive success that also some of the things being said about us aren’t also quite accurate, that they may be over-inflated and it is our job to make sure that we’re trying to bring that back to reality because inevitably, and we’ve experienced a little bit of this over the last few years, reality catches up, whether it’s too extreme positive or too extreme negative. Our job is to try and make sure we keep the market fully informed of the direction, both short and long-term.

Ross Greenwood: There you go. The chief executive of Domino’s Pizza and that initiative by the Labor Party, he is now encouraging the coalition to go along with it. Report not of the chief executives pay but also how it compares with the lowest paid in that organization and the median wage of the organization, but it gives you a sense of the life of a chief executive in one of our fastest growing companies over the past 10 years. Don Meij, the chief executive of Domino’s Pizza. As always, great to have a chat Don.

Don Meij: Thank you Ross.

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Image source: 2GB

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