Joyce may have left the building, but don't expect any changes at Qantas

Qantas CEO Alan Joyce has taken his golden parachute and dived out the exit two months early.

It's clearly damage control by the board, and it is unlikely to work as a public relations tool, but then again, it won't do them too much personal harm. Failing in corporate Australia is often a relatively painless process.

Since the announcement of a $1.7 billion (US$1 billion) profit on Aug. 24, the share price topped out at $6.30 and has now fallen 12 percent in just a little more than a week. It could easily lose a lot more altitude. That's a measure of public opinion.

This is the result of a combination of factors that have been thrown into stark relief by the controversies swirling around the airline: Mr. Joyce's $24 million final year salary and bonuses; the refusal by the federal government of extra flights to Qatar; a $600 million lawsuit by the consumer watchdog; a $250 million class action over COVID travel refunds; another possible $570 million redemptions of travel credits they were trying to avoid; and the realisation that future capital costs will be huge due to a failure to invest in the fleet.

If everything falls the wrong way that $1.7 billion profit is illusory.

Mr. Joyce is taking the fall for these failures, but it will be a very soft fall if he even retains a fraction of his bonuses (one consolation for shareholders is that the value of his incentives package is in shares and share options, and these are also suffering due to his mismanagement).

Losing Mr. Joyce probably won't change anything for the airline as he had accomplices on the board and senior staff.

The board allowed him to get away with his self-interested strategies and is so in thrall to their now-former CEO that the best idea they could come up with for his replacement was Vanessa Hudson, the current CFO, who would be implicated in some of the poor, and how do I put this politely ... sneaky ... decision making.

The chair, and probably the new CEO, should follow Mr. Joyce, particularly if the ACCC claim is proven.

Controversies caused by a distorted free market

While this is a public relations disaster for the airline, it illustrates weaknesses in our corporate system. This is a private company, so they can pay whomever whatever they want, and conduct business in as poor a manner as they feel like. In a properly functioning market, they would be punished by shareholders or their competitors, but we don't have a properly functioning market when it comes to airlines.

Another factor is that Qantas, originally the Queensland and Northern Territory Air Service, holds a special place in Australian hearts as the Flying Kangaroo. When it gets into market trouble, the government can often be persuaded to step in, because the alternative would be almost the equivalent of "shooting Skippy."

Airlines are government-regulated, and slots at airports are finite, so it is difficult to set-up competitors, and even when they do, hard for them to be profitable-look at the history of Virgin.

The four top shareholders in Qantas are all nominee companies, which means they hold shares for a number of passive shareholders.

While their shareholding amounts to 63.04 percent (according to the 2022 Annual Report), and while they could theoretically stage a revolt, their most likely remedy is to head for the doors themselves.

But then they can't do that because when everyone wants to sell at the same time, there aren't enough parachutes to go around.

So what we have is a company where the board gets to control other people's money and spends it without accountability to either the market or their shareholders, and this allows their employees to grab inflated remuneration at the same time as delivering sub-par performance, all without any accountability bar some public relations damage which they can soothe with their severance packages as they retire to Noosa.

It's easy to make out a case from this behaviour that capitalism is corrupt, and we need to redistribute wealth, but that is a mistake.

You can make a better case that the real problem is not enough capitalism. With less government interference and a better functioning market tall poppies like Alan Joyce and his board would not be able to get ahead of themselves.

And shareholders should perhaps think about paying less attention to ESG factors, and more attention to operational ones.

For all Qantas has paid tribute to the fashionable virtues, underneath its vices have been allowed to grow.