David Thodey admits mishandling of Xero CEO pay negotiations amid second strike

David Thodey, the former Telstra chief executive and current chair of Xero, has conceded he could have managed discussions around CEO Sukhinder Singh Cassidy’s compensation package more effectively.

The comments come after Xero’s remuneration report received a second strike from shareholders, a significant rebuke that triggers a potential board spill under Australian corporate governance rules. The exact size of the vote against the pay report was not disclosed in the sources available.

Thodey’s admission was reported by the Financial Review, though the specific forum in which he made the remarks was not detailed. The chair’s reflection follows mounting investor unease over executive pay at the New Zealand-based accounting software company.

The second strike is a serious governance signal, indicating sustained dissatisfaction among shareholders with the board’s approach to compensation. Under the Corporations Act, a company that receives a 25% or greater “no” vote on its remuneration report for two consecutive years must hold a spill motion, allowing shareholders to vote on whether to re-elect the board.

Xero has not yet announced any formal response to the vote or detailed any planned changes to its remuneration policies beyond Thodey’s personal acknowledgement.

Why This Matters

Xero shareholders have now voted against the pay report twice, creating a pathway to a potential board spill that could reshape the company’s governance.
Thodey, a highly regarded corporate leader, admitting a misstep signals that the board takes the investor backlash seriously — but it also raises questions about the company’s broader governance culture.
The outcome will test whether Xero can restore shareholder trust or whether activist investors will push for changes at the board level.

Background

Xero is a New Zealand-founded cloud-based accounting software company dual-listed on the ASX and NZX. David Thodey, the former CEO of Telstra, has served as chairman since 2020. CEO Sukhinder Singh Cassidy took the helm in early 2023. Under Australian corporate law, a “second strike” on a remuneration report — meaning at least 25% of votes are cast against it for two consecutive years — triggers a resolution to spill the board. This is the second consecutive year Xero has faced such a vote.

Key Perspectives

Xero board: Chair David Thodey has acknowledged the process could have been handled better, suggesting the board is aware of the need to improve communication with shareholders about executive compensation. Investors: By delivering a second strike, shareholders have sent a strong signal that they view the remuneration package as excessive or poorly justified, though the specific reasons for their discontent have not been detailed in sources. Critics/Skeptics: The question remains whether an apology is sufficient. Some governance experts may argue that the board should have anticipated the backlash and adjusted the pay structure before the vote.

What to Watch

The exact percentage of votes cast against the remuneration report, to confirm whether the second strike threshold was clearly met.
Whether Xero calls a spill meeting and how shareholders vote on board re-election.
Any revisions to Singh Cassidy’s compensation package or changes to the board’s remuneration committee.

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