Inside the Alumina lunch club

Melbourne has long been Australia's clubbiest business community and the development and management of Australia's vast mineral resources has been plotted and planned by a group of closely associated blokes in the Collins Street boardrooms ever since the gold rush of the 1850s.

However, the last 12 years have seen the departure of Woodside and Alcoa to Perth, Rio Tinto's move to London, the merger of BHP and Billiton, the takeover of North and WMC and the collapse of Pasminco. This has put paid to the club, although the last remnants can be seen at Alumina Ltd, the post box company which owns a 40% stake in AWAC – a global aluminium and bauxite joint venture run by Alcoa out of Pittsburgh.

With just a CEO, company secretary, one other executive and support staff, there isn't much to be done, yet the board insists on paying themselves full freight, as if they were running some complex global mining operations with thousands of staff.

I opened the batting at Thursday's AGM by asking how the board was put together in 2001-02 and what they actually did. Were there specific things they could point to that Pittsburgh did or didn't do because of the actions of its minority Australian partner?

Chairman Don Morley said the board was put together by WMC management. They wisely decided that the man who had been finance director for 18 years would settle nicely into the Alumina chair for a fee of $212,500 a year, which will rise to $287,500 in 2006 – more than the $250,000 that WMC chairman Ian Burgess got in 2002 when he had 3,000 staff and 1,500 contractors to deal with.

As for their role, Morley pointed to a nice move which maximised franking credits for Australian shareholders and a related party transaction with Alcoa that the board signed off on. Fair enough, but what about the rest of the year?

I did my usual spray about the old Melbourne miners club and singled out Mark Rayner, who failed miserably as chairman of Pasminco, Mayne Nickless and NAB. Morley responded by saying Rayner was re-elected with 95% support last year, prompting a retort that such a low vote is the equivalent of a revolution in Australian corporate elections.

I later tipped Morley himself would get re-elected with between 99% and 99.5% and was spot on. Another director, Peter Hay, managed to keep a straight face when saying the board had done a performance review and Morley had come through with flying colours. Yes, that would be the same Peter Hay who was the Freehills partner most regularly used by WMC over the previous few years.

The lads are clearly taking this board pay issue seriously because Ron McNeilly, the former BHP Steel boss who was retrenched three years back, got up and gave a detailed seven minute speech in his role as chairman of Alumina's remuneration committee. He singled out the time commitment as one reason to justify this post box company getting fees equivalent to an operating miner, which led into my later questions about why on earth the board met 20 times in 2004. The response was amazing. Apparently, the three executives get a bit lonely and like to have their NEDs in the office for regular guidance and advice. To do what? Tell the world's biggest and best aluminium company across the Pacific what to do.

All up, it was an entertaining meeting and the response from shareholders was very strong, although one old dear came up later and gave me a gobful for being disrespectful. She calmed down a bit later and revealed she'd turned 80 last week and had about 100 shares worth $7 million. Not bad for someone who spent 43 years as a nurse.

Unfortunately, my lobbying of the two proxy voting kingmakers, Institutional Shareholder Services and Corporate Governance International, came to nothing because the remuneration report was approved by more than 99% of shares voted. However, on the floor of the meeting it was a close call and the Australian Shareholders' Association representative said he had proxies that were running 4-1 against. Indeed, the little guys know what a rort these fat board fees are.

Copyright © 2024 The Mayne Report. All rights reserved

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