ASX board tilt, Margaret Jackson, Hellicar, consumer conflicts, Macquarie and iiNet CEO email
February 2, 2010
Dear Mayne Reporters,
this will be the only edition for the week but it was worth the wait as we unveil the following:
Click through for the full edition and 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.
this will be the only edition for the week but it was worth the wait as we unveil the following:
- plans for an ASX board tilt no matter what;
- the latest potential conflict of interest for Margaret Jackson;
- plans for an AMP board tilt if former James Hardie chair Meredith Hellicar doesn't quit;
- chronic conflicts of interest in the consumer movement;
- tough questions for next week's Macquarie Airports AGM;
- an email exchange with iiNet CEO Michael Malone; and
- the action plan for this morning Bell Financial Group AGM in Melbourne.
Click through for the full edition and 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.
Having a crack at the ASX board
David Gonski chaired the AGM of Coca Cola Amatil in Sydney yesterday which unfortunately clashed with AMP as they both started at 10am.
I didn't make either, but will be travelling to Sydney in October for Gonski's next big AGM, ASX Ltd, when he'll replace Maurice Newman as the new chairman.
There's no problem with Gonski taking on this gig as he's one of the smartest and best connected business figures in Australia. However, there is a problem with the soft approach that the ASX takes to supervision and governance, especially given its fundamental conflict of interest as a profit-driven monopoly.
We had a crack at The AFR for joint venturing with the ASX on some seminars in this video last week, so it was pleasing to see our monopoly financial daily re-asserting its independence with a strong story on page three yesterday about disquiet over slackening ASX education standards for brokers wanting to sell derivatives.
Rather than hiving off market regulation to ASIC, which simply doesn't have enough runs on the board to inspire confidence, the ASX needs some directors and executives who are known believers in disclosure, transparency and good corporate governance.
This is Australia, unfortunately. No credible candidate will step forward so we're putting our cards on the table today and revealing that ASX Ltd will be the major board tilt in the October-November AGM season.
The platform will be very straight forward - vote for the candidate who recognises the conflict and wants to tackle it whilst also boosting market supervision.
The world's best known shareholder activist is US billionaire Carl Icahn, who in the last couple of hours has launched a proxy fight by nominating 10 candidates to the Yahoo! board as the reprisals flow for rejecting the Microsoft takeover bid.
However, the world's most effective retail shareholder activist is an ex-BZW investment banker in Hong Kong called David Webb. I've been to his place for a chat and discussed his greatest achievement - getting elected to the board of Hong Kong Exchanges & Clearing Ltd, the equivalent of the ASX.
It's been six years since the last of my three consecutive tilts at the ASX board so this time we're announcing it early and intend to campaign more comprehensively than ever before.
I didn't make either, but will be travelling to Sydney in October for Gonski's next big AGM, ASX Ltd, when he'll replace Maurice Newman as the new chairman.
There's no problem with Gonski taking on this gig as he's one of the smartest and best connected business figures in Australia. However, there is a problem with the soft approach that the ASX takes to supervision and governance, especially given its fundamental conflict of interest as a profit-driven monopoly.
We had a crack at The AFR for joint venturing with the ASX on some seminars in this video last week, so it was pleasing to see our monopoly financial daily re-asserting its independence with a strong story on page three yesterday about disquiet over slackening ASX education standards for brokers wanting to sell derivatives.
Rather than hiving off market regulation to ASIC, which simply doesn't have enough runs on the board to inspire confidence, the ASX needs some directors and executives who are known believers in disclosure, transparency and good corporate governance.
This is Australia, unfortunately. No credible candidate will step forward so we're putting our cards on the table today and revealing that ASX Ltd will be the major board tilt in the October-November AGM season.
The platform will be very straight forward - vote for the candidate who recognises the conflict and wants to tackle it whilst also boosting market supervision.
The world's best known shareholder activist is US billionaire Carl Icahn, who in the last couple of hours has launched a proxy fight by nominating 10 candidates to the Yahoo! board as the reprisals flow for rejecting the Microsoft takeover bid.
However, the world's most effective retail shareholder activist is an ex-BZW investment banker in Hong Kong called David Webb. I've been to his place for a chat and discussed his greatest achievement - getting elected to the board of Hong Kong Exchanges & Clearing Ltd, the equivalent of the ASX.
It's been six years since the last of my three consecutive tilts at the ASX board so this time we're announcing it early and intend to campaign more comprehensively than ever before.
Another potential conflict for Margaret Jackson
What is it about Margaret Jackson and her lawyer husband Roger Donazzan?
I've been banging on about their potential conflicts of interest for years, most notably around their 2004 investment in a Japanese ski field development that Qantas flies to and Jacko's chairmanship of Flexigroup which appears to compete with ANZ where she remains a director.
Yesterday's mail bag included an explanatory memorandum from travel company Jetset which is merging with Qantas Holidays and Qantas Business Travel. And who pops up in the Jetset top 20 with 400,000 shares? None other than Roger Donazzan.
Now this deal was only announced in February and Jacko quit as Qantas chairman last November, but what on earth was her husband doing with about $1 million of their money invested in a competitor to the flying kangaroo for at least part of her seven years in the chair.
Jacko has previously threatened to sue me for talking about her potential conflicts, but I can't see how expressing an opinion about these agreed facts is defamatory.
She tolerated completely unacceptable conflicts for her Qantas management team during the private equity bid process last year and this is just the latest example.
Donazzan is an old lawyer mate of Steve Vizard, which partly explains how he landed his first corporate gig way back in 1994 when Jeff Kennett appointed him to the board of the Transport Accident Commission. Jackson was chair at the time. Vizard has shown himself to have no concept of conflict of interest and his mates Margaret and Roger seem to have developed a similar blind spot.
I've been banging on about their potential conflicts of interest for years, most notably around their 2004 investment in a Japanese ski field development that Qantas flies to and Jacko's chairmanship of Flexigroup which appears to compete with ANZ where she remains a director.
Yesterday's mail bag included an explanatory memorandum from travel company Jetset which is merging with Qantas Holidays and Qantas Business Travel. And who pops up in the Jetset top 20 with 400,000 shares? None other than Roger Donazzan.
Now this deal was only announced in February and Jacko quit as Qantas chairman last November, but what on earth was her husband doing with about $1 million of their money invested in a competitor to the flying kangaroo for at least part of her seven years in the chair.
Jacko has previously threatened to sue me for talking about her potential conflicts, but I can't see how expressing an opinion about these agreed facts is defamatory.
She tolerated completely unacceptable conflicts for her Qantas management team during the private equity bid process last year and this is just the latest example.
Donazzan is an old lawyer mate of Steve Vizard, which partly explains how he landed his first corporate gig way back in 1994 when Jeff Kennett appointed him to the board of the Transport Accident Commission. Jackson was chair at the time. Vizard has shown himself to have no concept of conflict of interest and his mates Margaret and Roger seem to have developed a similar blind spot.
Revealed: Australia's heavily conflicted consumer movement
The Reserve Bank has today released this interesting article tracking Australia's exorbitant bank fees, which politicians, regulators and consumer group have failed to do anything about over the past decade.
It is worth considering in the context of this Crikey story on Westpac CEO Gail Kelly, her conflict and the lack of a decent consumer movement in Australia. Why does no one else seem to care about this? It seems conflict of interest partly explains the neutering of our consumer groups.
Try this for size. The current chair of Choice is Jenni Mack. She is also on the Boards of a number of industry ombudsman schemes and interestingly is slotted for a paid gig on the board of the new merged Financial Services Ombudsman that will be dominated by the banks and led by long-serving 'bankers friend' Colin Neave AM.
Mack is the Consumers Federation of Australia nomination on a number of these industry ombudsman schemes and thus influences what the CFA says and does about them, which isn't much as you can see here.
The merged scheme is a triumph of the political skills of the old insurance war horse Peter Daly AM and Colin Neave, who was the long-time chair of the Howard government's National Consumer Affairs Advisory Council which made sod all negative comments about banks over ten years.
By getting the merger through before the change of government they seem to have seen off the threat of the Rudd Government bringing it under statutory remit and thus greater scrutiny and accountability. It remains a multi-million dollar monopoly "dispute" business that in return provides sinecures for "consumer advocates".
Of course, one lives in hope that the Rudd goverment may reinvigorate the consumer discourse in this country and thus scrutiny of the financial services sector more generally.
John Howard and Peter Costello hated consumer advocates with a passion and defunded and neutered them. The release last week of the Productivity Commission report into Consumer Policy frameworks, although rather tame, does suggest some hooks for further action.
One proposal is for the establishment of a National Consumer Policy Research Centre (NCPRC). This could provide a national focus for consumer advocacy based on independent, thorough and objective research. Importantly it would provide real competition for the lone and sometimes mute voice of Choice, which has had the field to themselves for the last decade.
However, if the new federal Consumer Affairs minister Chris Bowen falls under the thrall of the industry captured advocates such as Jenni Mack then it will lack a real chance of progress.
ANZ executive Gerard Brown is still on the Consumer Action Board, which is the second consumer group in size after Choice, so it is no surprise that they are low key in bank critiquing especially when the ANZ is concerned. That CAB doesn't understand good goverance and transparency is evidenced by the way they do not disclose this conflict on their web site or indeed declare how their board is appointed and where they come from. No democracy there, it seems.
It is worth considering in the context of this Crikey story on Westpac CEO Gail Kelly, her conflict and the lack of a decent consumer movement in Australia. Why does no one else seem to care about this? It seems conflict of interest partly explains the neutering of our consumer groups.
Try this for size. The current chair of Choice is Jenni Mack. She is also on the Boards of a number of industry ombudsman schemes and interestingly is slotted for a paid gig on the board of the new merged Financial Services Ombudsman that will be dominated by the banks and led by long-serving 'bankers friend' Colin Neave AM.
Mack is the Consumers Federation of Australia nomination on a number of these industry ombudsman schemes and thus influences what the CFA says and does about them, which isn't much as you can see here.
The merged scheme is a triumph of the political skills of the old insurance war horse Peter Daly AM and Colin Neave, who was the long-time chair of the Howard government's National Consumer Affairs Advisory Council which made sod all negative comments about banks over ten years.
By getting the merger through before the change of government they seem to have seen off the threat of the Rudd Government bringing it under statutory remit and thus greater scrutiny and accountability. It remains a multi-million dollar monopoly "dispute" business that in return provides sinecures for "consumer advocates".
Of course, one lives in hope that the Rudd goverment may reinvigorate the consumer discourse in this country and thus scrutiny of the financial services sector more generally.
John Howard and Peter Costello hated consumer advocates with a passion and defunded and neutered them. The release last week of the Productivity Commission report into Consumer Policy frameworks, although rather tame, does suggest some hooks for further action.
One proposal is for the establishment of a National Consumer Policy Research Centre (NCPRC). This could provide a national focus for consumer advocacy based on independent, thorough and objective research. Importantly it would provide real competition for the lone and sometimes mute voice of Choice, which has had the field to themselves for the last decade.
However, if the new federal Consumer Affairs minister Chris Bowen falls under the thrall of the industry captured advocates such as Jenni Mack then it will lack a real chance of progress.
ANZ executive Gerard Brown is still on the Consumer Action Board, which is the second consumer group in size after Choice, so it is no surprise that they are low key in bank critiquing especially when the ANZ is concerned. That CAB doesn't understand good goverance and transparency is evidenced by the way they do not disclose this conflict on their web site or indeed declare how their board is appointed and where they come from. No democracy there, it seems.
Meredith Hellicar's last public company AGM?
Former James Hardie chairman Meredith Hellicar made a rare public appearance yesterday when she fronted the AMP AGM in Sydney. Hopefully, it will be her last AGM because what her board tried to do with those asbestos liabilities remains an absolute disgrace.
When Meredith was last re-elected to the AMP board in 2006, I got up and urged shareholders to vote against her based on the James Hardie scandal and the macabre situation of Australia's biggest life insurer retaining a director who chaired a company whose products killed thousands of Australians. Check out the report for Crikey at the time.
It didn't change the vote too much because she got another three years with 606.6 million proxies in favour and just 12.4 million against. However, that was before ASIC launched its proceedings against the entire James Hardie board and a range of executives on February 17, 2007.
One of those directors, the former AMP chairman Peter Willcox who recruited Hellicar to the board, promptly stood down as chairman of the CSIRO, but he remains on the Telstra board, just as Hellicar still sits on the AMP board.
AMP chairman Peter Mason opened his address yesterday by pointing out that the company has a new CEO and three new directors since the previous AGM and this was all "part of our disciplined approach to succession planning".
Well, it seems AMP needs the discipline of a contested election to do the right thing with Meredith Hellicar. If Meredith decides to run again next year when her three year term expires, I'll be running against her on a specific platform highlighting the inappropriateness of having the former James Hardie chair on the AMP board.
That means we'll need an announcement that she's going by February next year before nominations close. Otherwise, it will be tilt number three for AMP.
When Meredith was last re-elected to the AMP board in 2006, I got up and urged shareholders to vote against her based on the James Hardie scandal and the macabre situation of Australia's biggest life insurer retaining a director who chaired a company whose products killed thousands of Australians. Check out the report for Crikey at the time.
It didn't change the vote too much because she got another three years with 606.6 million proxies in favour and just 12.4 million against. However, that was before ASIC launched its proceedings against the entire James Hardie board and a range of executives on February 17, 2007.
One of those directors, the former AMP chairman Peter Willcox who recruited Hellicar to the board, promptly stood down as chairman of the CSIRO, but he remains on the Telstra board, just as Hellicar still sits on the AMP board.
AMP chairman Peter Mason opened his address yesterday by pointing out that the company has a new CEO and three new directors since the previous AGM and this was all "part of our disciplined approach to succession planning".
Well, it seems AMP needs the discipline of a contested election to do the right thing with Meredith Hellicar. If Meredith decides to run again next year when her three year term expires, I'll be running against her on a specific platform highlighting the inappropriateness of having the former James Hardie chair on the AMP board.
That means we'll need an announcement that she's going by February next year before nominations close. Otherwise, it will be tilt number three for AMP.
A question for the Macquarie Airports board
The Macquarie Airports AGM is coming up on Thursday next week and I'm really looking forward to getting into the detail of all these fee arrangements. Here's an example of one question I'm keen to ask:
"Did Macquarie Group, as the manager of Macquarie Airports Group (in which Macquarie Airports has a 64.2% interest), get a performance fee of $147.4 million for the sale of its interest in Birmingham Airport for GBP210 million (approximately $506 million). In other words, did Macquarie receive a whopping 29% of the sale price (not the profit on sale) as a fee?"
Macquarie have mastered the business model of extracting huge fees from associated funds, but this one really looks excessive so it will be interesting to hear the response.
Macquarie have mastered the business model of extracting huge fees from associated funds, but this one really looks excessive so it will be interesting to hear the response.
Some questions for the Bell Financial Group board today
I'll be heading to level 29 of 101 Collins Street this morning for the first AGM of stockbroker Bell Financial Group which sold 44 million shares to the public at $2 a pop right at the peak of the market last November. You can see all the details here.
The company's shares are now wallowing at $1.20 and silly old me bought 219 at $2.29 on December 17 last year.
Bell Financial Group was planning to buy the stricken Tricom Securities but pulled out after conducting due diligence so I'll be exploring what happened with these negotiations, given that Danish investor Saxo Bank has subsequently paid $20 million for a 35% stake.
Kerry Packer's former finance man Graeme Cubbin is one of the directors, along with Colin Bell, the man who bought Rupert Murdoch's sheep properties for about $40 million a decade ago.
The Australian had a very interesting article a few weeks back claiming that some of the key staff are heavily geared into their shareholdings so we'll also be exploring this issue.
The company's shares are now wallowing at $1.20 and silly old me bought 219 at $2.29 on December 17 last year.
Bell Financial Group was planning to buy the stricken Tricom Securities but pulled out after conducting due diligence so I'll be exploring what happened with these negotiations, given that Danish investor Saxo Bank has subsequently paid $20 million for a 35% stake.
Kerry Packer's former finance man Graeme Cubbin is one of the directors, along with Colin Bell, the man who bought Rupert Murdoch's sheep properties for about $40 million a decade ago.
The Australian had a very interesting article a few weeks back claiming that some of the key staff are heavily geared into their shareholdings so we'll also be exploring this issue.
An email exchange with iiNet founder Michael Malone
Our campaign against companies which do institutional placements without a follow-through share purchase plan offer to small shareholders continues apace. The earlier skirmish with Australia's 3rd biggest ISP, iiNet, can be seen here and today we've received an email from founder and CEO Michael Malone.
From: Michael Malone
Sent: Tuesday, 13 May 2008 3:16 PM
To: Clive Stein
Cc: smayne@crikey.com.au
Subject: Re: iinet capital raising
Hi Stephen,
I hope you don't mind me emailing you directly in response to your comments below.
We're a pretty small business, with a small register. 60% of our shares are held by my family, Amcom and Telecom NZ. A further 25-30% is held by staff and institutional investors.
In this case, I didn't even know we had a deal for definite until Monday. As you can imagine, we were still negotiating key points on Monday morning! Once it was signed, we had a very limited time to actually raise the cash. $41 million is being raised from the market, with the balance from our bank. The transaction was supported by Amcom and Telecom NZ, meaning $25 million had to be raised quickly. The vendors wanted cash only and very much wanted to minimise the timeframe between the announcement of the transaction and the date of settlement. It's a private business and of course they carried the risk of any negative impact on their business during this time.
Bluntly speaking, if I couldn't get the money this quickly, there wouldn't have been a deal at all.
The raising was done at a very small discount. Our share price has traded as low as $1.34 in the past month. We did the raising at $1.60, off a closing share price of $1.65.
I'd specifically note that I did not participate in the raising myself. I hold 20% of the stock, and like other retail holders I have also been diluted by the raising. However, the share price is now up 20%, so I'm very happy with it.
I do take your point and I can only promise that I did consider it carefully prior to the raising. But in the end, the SPP would have delivered an uncertain amount of money, the s802 raising was quick and certain, and the result has been a good one for all shareholders, including minorities.
Regards, Michael
And here's the reply
From: Stephen Mayne
Sent: Thursday, 15 May 2008 11:45 PM
To: 'Michael Malone'; 'Clive Stein'
Subject: RE: iinet capital raising
Hi Michael, thanks for taking the time to reply.
All of these are good points, but there's absolutely nothing stopping you announcing an SPP at $1.60 today, next month or next year.
Everyone knows that SPPs are not the vehicle for fast capital. It is normal practice for the SPP offer to follow a few weeks after the placement.
If cost was an issue, you could and should have sent the SPP offer out with the notice of meeting for the EGM which arrived in the mail today.
If you don't make such an offer, I can only conclude that big insider shareholders that are close to the founder get a better run from iinet than ordinary punters.
Surely after your botched Ozemail integration you've learnt about the importance of not gratuitously aggravating stakeholders, be they customers or shareholders.
Regards, Stephen Mayne
Sent: Tuesday, 13 May 2008 3:16 PM
To: Clive Stein
Cc: smayne@crikey.com.au
Subject: Re: iinet capital raising
Hi Stephen,
I hope you don't mind me emailing you directly in response to your comments below.
We're a pretty small business, with a small register. 60% of our shares are held by my family, Amcom and Telecom NZ. A further 25-30% is held by staff and institutional investors.
In this case, I didn't even know we had a deal for definite until Monday. As you can imagine, we were still negotiating key points on Monday morning! Once it was signed, we had a very limited time to actually raise the cash. $41 million is being raised from the market, with the balance from our bank. The transaction was supported by Amcom and Telecom NZ, meaning $25 million had to be raised quickly. The vendors wanted cash only and very much wanted to minimise the timeframe between the announcement of the transaction and the date of settlement. It's a private business and of course they carried the risk of any negative impact on their business during this time.
Bluntly speaking, if I couldn't get the money this quickly, there wouldn't have been a deal at all.
The raising was done at a very small discount. Our share price has traded as low as $1.34 in the past month. We did the raising at $1.60, off a closing share price of $1.65.
I'd specifically note that I did not participate in the raising myself. I hold 20% of the stock, and like other retail holders I have also been diluted by the raising. However, the share price is now up 20%, so I'm very happy with it.
I do take your point and I can only promise that I did consider it carefully prior to the raising. But in the end, the SPP would have delivered an uncertain amount of money, the s802 raising was quick and certain, and the result has been a good one for all shareholders, including minorities.
Regards, Michael
And here's the reply
From: Stephen Mayne
Sent: Thursday, 15 May 2008 11:45 PM
To: 'Michael Malone'; 'Clive Stein'
Subject: RE: iinet capital raising
Hi Michael, thanks for taking the time to reply.
All of these are good points, but there's absolutely nothing stopping you announcing an SPP at $1.60 today, next month or next year.
Everyone knows that SPPs are not the vehicle for fast capital. It is normal practice for the SPP offer to follow a few weeks after the placement.
If cost was an issue, you could and should have sent the SPP offer out with the notice of meeting for the EGM which arrived in the mail today.
If you don't make such an offer, I can only conclude that big insider shareholders that are close to the founder get a better run from iinet than ordinary punters.
Surely after your botched Ozemail integration you've learnt about the importance of not gratuitously aggravating stakeholders, be they customers or shareholders.
Regards, Stephen Mayne