Macquarie, AWB, foreign ownership, market movers and Alumina tilt
February 2, 2010
Dear Mayne Report subscribers,
in today's edition we've got two stories on Macquarie Bank's momentous day, an AWB package ahead of next Tuesday's vital AGM, more on foreign ownership of our resources sector, a reply from Alumina after our board tilt and all the traffic figures from our first four months.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
in today's edition we've got two stories on Macquarie Bank's momentous day, an AWB package ahead of next Tuesday's vital AGM, more on foreign ownership of our resources sector, a reply from Alumina after our board tilt and all the traffic figures from our first four months.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
Macquarie changes its bonus structure
It has been a huge day for business news with BHP-Billiton's Rio Tinto bid, the markets tumbling, CBA's interest rate belligerence and Macquarie Bank's regime change from Allan Moss to Nicholas Moore.
However, the big news on the corporate governance front is that from April 1 this year, the leadership team at Macquarie Bank will be on a far more appropriate profit-sharing scheme.
Macquarie has listened to the protest vote at last year's AGM and acted. Excessive cash bonuses based on short-term performance are out and longer term equity incentive schemes are in. See this Crikey report after the AGM for the context.
Rather than only 20% of the profit share being withheld in Macquarie instruments for up to 10 years, an additional 35% will be used to buy Macquarie Group shares that must be held for at least three years. See page five of the announcement for the specifics.
The change happens immediately for Moore and will be phased in progressively for the rest of the management committee. And isn't it interesting how the change came after co-founder David Clarke stepped down as executive chairman and become a non-executive chairman on a fixed $680,000 a year from April 1 last year.
The Macquarie protest vote in 2007 was one of 20 largest we've seen in Australia against an ASX 200 remuneration report and this has delivered an immediate change of policy that will see more than 90% of shares being voted in favour of this year's remuneration report.
There is no way this would have happened without Peter Costello's reform which gave us voting on remuneration report. How ironic that he is now rumoured to be headed into the Macquarie executive ranks on his return from overseas.
Well done to all concerned, especially Dean Paatsch and Martin Lawrence at proxy advising outfit Risk Metrics which recommended against the remuneration report and delivered the 21% protest vote.
Macquarie ran a big campaign against Risk Metrics, including this briefing document which was circulated to various institutional shareholders last July.
It didn't work and now they have changed their practices for the better. Well done Macquarie for acting promptly.
However, the big news on the corporate governance front is that from April 1 this year, the leadership team at Macquarie Bank will be on a far more appropriate profit-sharing scheme.
Macquarie has listened to the protest vote at last year's AGM and acted. Excessive cash bonuses based on short-term performance are out and longer term equity incentive schemes are in. See this Crikey report after the AGM for the context.
Rather than only 20% of the profit share being withheld in Macquarie instruments for up to 10 years, an additional 35% will be used to buy Macquarie Group shares that must be held for at least three years. See page five of the announcement for the specifics.
The change happens immediately for Moore and will be phased in progressively for the rest of the management committee. And isn't it interesting how the change came after co-founder David Clarke stepped down as executive chairman and become a non-executive chairman on a fixed $680,000 a year from April 1 last year.
The Macquarie protest vote in 2007 was one of 20 largest we've seen in Australia against an ASX 200 remuneration report and this has delivered an immediate change of policy that will see more than 90% of shares being voted in favour of this year's remuneration report.
There is no way this would have happened without Peter Costello's reform which gave us voting on remuneration report. How ironic that he is now rumoured to be headed into the Macquarie executive ranks on his return from overseas.
Well done to all concerned, especially Dean Paatsch and Martin Lawrence at proxy advising outfit Risk Metrics which recommended against the remuneration report and delivered the 21% protest vote.
Macquarie ran a big campaign against Risk Metrics, including this briefing document which was circulated to various institutional shareholders last July.
It didn't work and now they have changed their practices for the better. Well done Macquarie for acting promptly.
Allan Moss joins the legendary market movers club
Whether its a huge bouquet for Allan Moss or an equally large brickbat for Nicholas Moore, the record shows that the market hates this changing of the guard because Macquarie Group shares plunged 9% today after plunging $6.06 to $61.10.
This destroyed $1.66 billion of market capitalisation and is the biggest wipe-out of value that we've even seen at a major Australian company after an appointment.
Check out the full list here. Whilst a Kaz Computing board coup was worse, it was never a top 200 company. The next biggest collapse was the 8% plunge in Coles Myer shares on the day Phillip Bowman was fired way back in 1995, although you need to factor in today's 3% plunge in the broader market.
In terms of appointments that caused a big share price fall, Nicholas Moore is also top of the pops, although the only other big one we've noted was when PBL hired another Macquarie Banker in Peter Yates, causing a 6% share price route on March 28, 2001.
Allan Moss deserves to go out as an absolute Australian business legend. We've packaged up a few of our favourite exchanges with the lad over the years.
Let's just hope he chooses to write the tell-all book one day because the rise and rise of Macquarie Bank is one of the most remarkable business stories in Australia.
This destroyed $1.66 billion of market capitalisation and is the biggest wipe-out of value that we've even seen at a major Australian company after an appointment.
Check out the full list here. Whilst a Kaz Computing board coup was worse, it was never a top 200 company. The next biggest collapse was the 8% plunge in Coles Myer shares on the day Phillip Bowman was fired way back in 1995, although you need to factor in today's 3% plunge in the broader market.
In terms of appointments that caused a big share price fall, Nicholas Moore is also top of the pops, although the only other big one we've noted was when PBL hired another Macquarie Banker in Peter Yates, causing a 6% share price route on March 28, 2001.
Allan Moss deserves to go out as an absolute Australian business legend. We've packaged up a few of our favourite exchanges with the lad over the years.
Let's just hope he chooses to write the tell-all book one day because the rise and rise of Macquarie Bank is one of the most remarkable business stories in Australia.
Driving for change at AWB
The proposed change to the AWB constitution will be one of the biggest governance tests of the year so we're getting behind it every way we can.
The full video of Tuesday's 774 ABC Melbourne outside broadcast interview with AWB CEO Gordon Davis is available here.
We're also leading the words part of our website with this story and have today produced this video, although the tennis outfit and head band really is very daggy.
Like any self-interested group, the farmers are unlikely to deliver the 75% vote required to strip them of their board majority. However, they need to be shamed, cajoled and lobbied to do the right thing.
Dodgy governance in a dreadful deal with former deputy prime minister John Anderson created the environment which allowed the bribes scandal to flourish for years, so we really need to punish those responsible and clean up the AWB board room, which still has 4 farmer directors who have been there since the late 1990s.
The full video of Tuesday's 774 ABC Melbourne outside broadcast interview with AWB CEO Gordon Davis is available here.
We're also leading the words part of our website with this story and have today produced this video, although the tennis outfit and head band really is very daggy.
Like any self-interested group, the farmers are unlikely to deliver the 75% vote required to strip them of their board majority. However, they need to be shamed, cajoled and lobbied to do the right thing.
Dodgy governance in a dreadful deal with former deputy prime minister John Anderson created the environment which allowed the bribes scandal to flourish for years, so we really need to punish those responsible and clean up the AWB board room, which still has 4 farmer directors who have been there since the late 1990s.
More foreign-controlled mines
The takeover battle for Rio Tinto will put the debate about foreign ownership of Australian resource projects front and centre, so we're working hard to update our list of foreign-controlled major resource projects, which now numbers 34.
Here are another six entries, five of which come courtesy of the BHP-Mitsubishi joint venture in Queensland. Incidentally, Mitsubishi Motors is 14% owned by Mitsubishi Corp, which is the largest Japanese trading house. So while they've written off $1.5 billion on that dud Adelaide plant, they've made many billions more from their Australian coal play.
Goonyella Riverside Mine: the Bowen Basin mine in Queensland produces 14 million tonnes a year of coking coal and is a 50-50 joint venture between BHP-Billiton and Japanese trading giant Mitsubishi. BHP is 40% Australian-owned so overall foreign ownership of this mine is 80%. The standard 7% Queensland coal royalty applies.
Peak Downs: the Bowen Basin mine in Queensland produces 9 million tonnes a year of coking coal and is a 50-50 joint venture between BHP-Billiton and Japanese trading giant Mitsubishi.
Saraji: the Bowen Basin mine in Queensland produces 6.8 million tonnes a year of coking coal and is a 50-50 joint venture between BHP-Billiton and Japanese trading giant Mitsubishi.
Norwich Park Mine: the Bowen Basin mine in Queensland produces 5.7 million tonnes a year of coking coal and is a 50-50 joint venture between BHP-Billiton and Japanese trading giant Mitsubishi.
Blackwater: the Bowen Basin mine in Queensland produces 14 million tonnes a year of coking and thermal coal and is a 50-50 joint venture between BHP-Billiton and Japanese trading giant Mitsubishi.
Krestel: the old Gordonstone coal mine in Queensland which Rio Tinto renamed after buying out Arco in 1998. Currently undergoing a $1.1 billion expansion to extend its life by 20 years but Rio Tinto is only 15% Australian owned.
Here are another six entries, five of which come courtesy of the BHP-Mitsubishi joint venture in Queensland. Incidentally, Mitsubishi Motors is 14% owned by Mitsubishi Corp, which is the largest Japanese trading house. So while they've written off $1.5 billion on that dud Adelaide plant, they've made many billions more from their Australian coal play.
Goonyella Riverside Mine: the Bowen Basin mine in Queensland produces 14 million tonnes a year of coking coal and is a 50-50 joint venture between BHP-Billiton and Japanese trading giant Mitsubishi. BHP is 40% Australian-owned so overall foreign ownership of this mine is 80%. The standard 7% Queensland coal royalty applies.
Peak Downs: the Bowen Basin mine in Queensland produces 9 million tonnes a year of coking coal and is a 50-50 joint venture between BHP-Billiton and Japanese trading giant Mitsubishi.
Saraji: the Bowen Basin mine in Queensland produces 6.8 million tonnes a year of coking coal and is a 50-50 joint venture between BHP-Billiton and Japanese trading giant Mitsubishi.
Norwich Park Mine: the Bowen Basin mine in Queensland produces 5.7 million tonnes a year of coking coal and is a 50-50 joint venture between BHP-Billiton and Japanese trading giant Mitsubishi.
Blackwater: the Bowen Basin mine in Queensland produces 14 million tonnes a year of coking and thermal coal and is a 50-50 joint venture between BHP-Billiton and Japanese trading giant Mitsubishi.
Krestel: the old Gordonstone coal mine in Queensland which Rio Tinto renamed after buying out Arco in 1998. Currently undergoing a $1.1 billion expansion to extend its life by 20 years but Rio Tinto is only 15% Australian owned.
Over Fifty CEO had to go
Melbourne has long been the home of clubby boardrooms so it was terrific so see the directors of one slumbering company get cleaned out a few weeks back in the interests of shareholder accountability.
John MacBain sold his Century Funds Management business into the Over Fifty Group in 2006 and he and his staff ended up with about 12% of the expanded company.
After more than a year of frustration at the management processes and lack of board renewal, MacBain decided to requisition a meeting to remove the four other non-executive directors and elect his own slate.
The OFG non-executive directors owned less than 1% of the company and have been promising board renewal for years but never seemed to take it seriously. Now they are all gone, with the exception of John MacBain, and rightly so.
The final vote was a tight 53%-47% but the right crew won and this whole situation will hopefully send a message to other sleepy boards out there that you just can't treat your shareholders like mushrooms.
The vanquished crew spent hundreds of thousands of shareholder funds fighting a rear guard campaign but it failed and now luminaries such as former Australian Cricket Board chairman Malcolm Gray and former WorkCover chairman Bob Officer are gone.
The CEO of OFG, Chris Martin, took a very strong stand supporting the defeated board and bagging MacBain. No wonder he quit yesterday as MacBain took over as interim CEO.
That said, shareholders would also have noted that the stock hit a four-month low this week. It's an interesting combination of events.
John MacBain sold his Century Funds Management business into the Over Fifty Group in 2006 and he and his staff ended up with about 12% of the expanded company.
After more than a year of frustration at the management processes and lack of board renewal, MacBain decided to requisition a meeting to remove the four other non-executive directors and elect his own slate.
The OFG non-executive directors owned less than 1% of the company and have been promising board renewal for years but never seemed to take it seriously. Now they are all gone, with the exception of John MacBain, and rightly so.
The final vote was a tight 53%-47% but the right crew won and this whole situation will hopefully send a message to other sleepy boards out there that you just can't treat your shareholders like mushrooms.
The vanquished crew spent hundreds of thousands of shareholder funds fighting a rear guard campaign but it failed and now luminaries such as former Australian Cricket Board chairman Malcolm Gray and former WorkCover chairman Bob Officer are gone.
The CEO of OFG, Chris Martin, took a very strong stand supporting the defeated board and bagging MacBain. No wonder he quit yesterday as MacBain took over as interim CEO.
That said, shareholders would also have noted that the stock hit a four-month low this week. It's an interesting combination of events.
Alumina replies to board tilt
This reply from Alumina is a good example of why it is important that any board nomination letter includes the following: "If there are any outstanding qualification issues pursuant to your constitution could you please inform me of those before the deadline for nominations close."
Alumina have done the right thing in this email and I've agreed to resubmit within the nomination window. The full nomination letter can be seen at the bottom of this edition.
From: Stephen Foster [mailto:stephen.foster@aluminalimited.com]
Sent: Tuesday, 5 February 2008 2:32 PM
To: smayne@crikey.com.au
Subject: Nomination for Alumina Limited Board
Dear Stephen,
I confirm receipt of your nomination for the board of Alumina Limited at the annual general meeting, to be held on May 1, 2008. Please note that under the Company's constitution, in order to be valid, a notice of nomination must be left at the Company's Office not less than 40 days nor more than 56 days before the meeting. Whilst the Company is prepared to accept your nomination as valid even though it is outside that period, please be aware lodgement of the notice on January 30 2008 does not strictly comply with the Constitution and someone could take that point in relation to your nomination.
I will respond in due course to the other matters raised in your letter.
Yours Sincerely
Stephen Foster
Company Secretary
Alumina Limited
Alumina have done the right thing in this email and I've agreed to resubmit within the nomination window. The full nomination letter can be seen at the bottom of this edition.
From: Stephen Foster [mailto:stephen.foster@aluminalimited.com]
Sent: Tuesday, 5 February 2008 2:32 PM
To: smayne@crikey.com.au
Subject: Nomination for Alumina Limited Board
Dear Stephen,
I confirm receipt of your nomination for the board of Alumina Limited at the annual general meeting, to be held on May 1, 2008. Please note that under the Company's constitution, in order to be valid, a notice of nomination must be left at the Company's Office not less than 40 days nor more than 56 days before the meeting. Whilst the Company is prepared to accept your nomination as valid even though it is outside that period, please be aware lodgement of the notice on January 30 2008 does not strictly comply with the Constitution and someone could take that point in relation to your nomination.
I will respond in due course to the other matters raised in your letter.
Yours Sincerely
Stephen Foster
Company Secretary
Alumina Limited
Mayne Report traffic picking up nicely
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Most viewed articles Murdoch Campaign
November 2007:
Page Views: 13,883
Visits: 7,587
Most viewed articles Woolies tells pokies porkies, Campaign Costello
December 2007:
Page Views: 15,784
Visits: 11,704
Most viewed articles Jousting with the colourful HFA and MFS boys, At last an alternative the BRW Rich List
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Page Views: 26,200
Visits: 17,190
Most viewed articles: The 139 stocks we've bought in 2008, The 368 stocks we bought in 2007