Austar options slammed
January 18, 2008
This article appeared in The Herald Sun on May 22, 2001, after Austar AGM.
Shareholders in Austar United Communications yesterday approved lucrative executive options despite grumblings over the share price performance.
Some of the flack was levelled at former HIH Insurance director Justin Gardener, who is now a non-executive director of Austar and member of the audit committee.
Austar recently announced a near-doubled $95 million first-quarter operating loss.
Many investors paid $4.70 at the stock's listing in July 1999. Yesterday it closed at just 90, up 2.
Australian Shareholders' Association representative John Quinn expressed concern the share option plan did not have adequate performance hurdles.
"In a year when the company lost $319 million, why were five executives paid bonuses totalling almost $200,000?'' Mr Quinn asked directors at Austar's annual meeting in Sydney.
Austar executive chairman Michael Fries said the bonuses were not based on past performance, and were rather incentives to do better.
While all the options motions were carried overwhelmingly, Mr Fries was forced to defend Mr Gardener's position on the board.
Mr Gardener served at the collapsed second-largest general insurer HIH for two years from December 1998. The company went into liquidation in March with losses tipped to exceed $3 billion.
Proxy holder Stephen Mayne said there were similarities between Austar and HIH.
"Shareholders here should realise that there are some strong parallels of what has happened at HIH, namely that Mr Gardener up here was a director of HIH,'' Mr Mayne said, adding both firms used the same external auditor, Arthur Andersen.
"The fact that the parent company has the same auditor as the subsidiary, the chairman of the audit committee is a partner from the audit firm, it rings all those warning bells that we saw at HIH and we never heeded.''
Mr Fries expressed his confidence in Mr Gardener, who is also a director of Hutchison Telecommunications Australia, Combined Communications Network and Alpha Investment Management.
"We view Justin Gardener as an extremely valuable member of our board . . . we stand behind Justin's contribution to this board and we believe he will continue to make contributions to this board.''
Mr Gardener received 50,000 options pegged at $1.75, with a two-year hold.
Mr Mayne said another comparison between the companies was a high number of intangibles.
"We've got intangibles of $334 million, and we've got net assets as at September 31 of only $363 million,'' he said.
Mr Gardener rejected this, and said there was ``no similarity between Austar and HIH at all''.
"I'm getting blamed for things that took place long before I joined the board,'' he said. "I only joined the board in December 1998 . . . the problems clearly relate to before.''
Austar reiterated the company was "on target'' to produce a profit before interest, tax, depreciation and amortisation figure in the first quarter of 2002.
Mr Porter denied a shareholder's suggestion that a market penetration of 20 per cent over five years in regional Australia was a poor result.
But he said broadband would grow more slowly than anticipated.
United States-based parent UnitedGlobalCom recently lifted its stake in Austar to 81 per cent from 73 per cent, after having to take up a 26 per cent shortfall in Austar's $200 million rights issue.
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