AWB, Babcock, ANZ, Gunns, Hegarty...what a week
February 2, 2010
Dear Mayne Reporters,
from a governance point of view it's hard to remember a week quite like this one. Babcock & Brown appeared to have imploded, although the headstock and its satellites recovered some of the losses in afternoon trade today after this detailed and moderately convincing interview was published on Business Spectator.
Meanwhile, ANZ has today fired two top executives off the back of David Crawford's report into the Opes Prime fiasco, and one of them is institutional boss Peter Hodgson, who we identified as someone who had to go back in April when CEO Mike Smith appointed him to conduct the initial review.
Alan Kohler is calling for ANZ chairman Charles Goode to resign and I'll definitely be running against him at the AGM in December if he doesn't do the honourable thing in the next two months.
Mike Smith's folksy message to staff today is also well worth a read here.
All the action from AWB
I had to go to Shepparton for a speech last night so apologies for the delay in reporting back on yesterday's remarkable AWB EGM.
Check out this initial account in today's Crikey edition but there's plenty more as I gave the recalcitrants two strong sprays which we've now put up on our videoblog:
Opening spray against Cold War warriors
Final plea for directors to change sides and avoid litigation
Because the voting has been extended by two weeks, it is important that as many people as possible listen to the lunacy of the defenders of the farmer gerrymander. To that end, we've featured the two major ravers from yesterday's EGM:
NSW grower Jock Munro harks back to the second world war
WA's Bob Iffla erroneously invokes Rupert's News Corp gerrymander
Whilst the AWB board have pushed the envelope by extending voting until September 3, we've never before seen such a tight vote on such a vital issue from such a small turn out of just 27%.
It wasn't clear how many shares would have been voted at the meeting or which way the open proxies would have gone but this is how the farmer votes were positioned, remembering that success required a 75% super-majority;
For: 10,346
Against: 3,968
Open: 1,485
The directed proxies in favour were 72.28% against when excluding the open proxies but rose to 74.88% when including all the open proxies, so it might have been that there were a few open proxies not with the chairman that led to the public figure of 74.7%.
That said, there are more than 18,000 different farmer shareholders who control about 58,000 votes so both sides will now be chasing the 40,000-plus votes that haven't yet been cast.
Based on the ineptitude of the no case yesterday, it's hard to see them generating much more support but this fight won't be over until the fat lady sings and any subsequent court challenges have been defeated. Once that happens, AWB shares will start to rise as institutional shareholders get back on board.
Gunns and ABC Learning go into the weekend suspended
Two of Australia's most controversial companies, ABC Learning and Gunns, have gone into the weekend suspended from trading and with serious doubts hanging over their respective futures.
For Eddie Groves and ABC Learning, we're looking at yet another write-down forced by new auditor Brian Long from Ernst & Young. The statement warning about this did not sound at all promising.
Gunns is sinking under more than $1 billion in debt with fast disappearing political protection and a plunging share price as it desperately tries to raise up to $400 million BEFORE considering how on earth to fund the $2 billion pulp mill.
Nick Clark from The Mercury had a good summary of where it all went wrong for Gunns in today's paper and have a listen to this discussion with Tim Cox on ABC Tasmania yesterday morning.
The expanding $100m loss club
Insurance Australia Group and OZ Minerals have both joined the $100 million loss club for 2007-08, meaning we are now up to 13 so far, just shy of the record 15 in 2001-02. With the likes of Allco Finance Group and various other teetering financial engineering vehicles still to report, the final figure could yet hit 20.
IAG was a classic new broom balance sheet axe job as Mike Hawker took a $400 million write down and restructuring charge to generate a $261 million net loss.
The OZ Minerals effort was a real dogs breakfast, but the final outcome was a $543 million net loss for the second half after the book value of Andrew Michelmore's first Zinifex move, the $905 million takeover of Allegiance Mining, was written down to a miserable $466 million and already looks like a lemon.
Owen Hegarty's $8.35m farewell gift
I've seen some outrageous things over the years but the decision by the OZ Minerals board to give Owen Hegarty an $8.35 million ex gratia payout is right up there.
If ever the Rudd Government needed a reason to change the law on shareholder approval for CEO payouts, then here it is. Hegarty's original $10.7 million payout was comprehensively rejected by shareholders, so the board has just lowered it marginally to come under the approval threshhold which is 7 times the average salary over the previous three years. It's time to give shareholders the vote on any CEO payout above $1 million.
The OZ Minerals press release didn't even acknowledge the historic shareholder revolt. We all know that Oxiana turned OZ Minerals chairman Barry Cusack is a huge fan of Hegarty but how could the full board justify this? Peter Mansell, the former Zinifex chairman and current chairman of the OZ Minerals remuneration committee, clearly needs to publically explain how this happened and the legal basis behind the decision.
Afterall, Hegarty only has 5 more months to serve as chairman of the merger integration committee and is already off playing in new mining ventures. Why does a company that just declared a $543 million half year loss decide to gift its former CEO $8.35 million when there was no contractual requirement?
Another interesting question is the legal basis of the deal. Given that Hegarty was a non-executive director at the time the board made its decision, surely it is in breach of the NED pay cap approved by shareholders?
This one has plenty to run and the institutional shareholders above 5% such as Merrill Lynch, Axa and Barclays really should be coming off the long run.
Another woeful outcome from the CDPP
Finally today, the Commonwealth DPP has had another woeful outcome in court after the biggest financial planner behind Westpoint, Neil Burnard, got off with a 12-month suspended sentence and $50,000 fine. No wonder ASIC's press release this afternoon opened with its intentions to appeal.
Crikey's Adam Schwab gave ASIC and the CDPP this fearsome bollocking after they achieved an equally bad result in the Wallace Cameron case a few weeks back.
The regulators clearly need to do a lot better when it comes to locking up suits, because very few additions are being made to our ASIC jail list, despite the extraordinary collapses and controversies of recent months.
That's all for now.
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.
from a governance point of view it's hard to remember a week quite like this one. Babcock & Brown appeared to have imploded, although the headstock and its satellites recovered some of the losses in afternoon trade today after this detailed and moderately convincing interview was published on Business Spectator.
Meanwhile, ANZ has today fired two top executives off the back of David Crawford's report into the Opes Prime fiasco, and one of them is institutional boss Peter Hodgson, who we identified as someone who had to go back in April when CEO Mike Smith appointed him to conduct the initial review.
Alan Kohler is calling for ANZ chairman Charles Goode to resign and I'll definitely be running against him at the AGM in December if he doesn't do the honourable thing in the next two months.
Mike Smith's folksy message to staff today is also well worth a read here.
All the action from AWB
I had to go to Shepparton for a speech last night so apologies for the delay in reporting back on yesterday's remarkable AWB EGM.
Check out this initial account in today's Crikey edition but there's plenty more as I gave the recalcitrants two strong sprays which we've now put up on our videoblog:
Opening spray against Cold War warriors
Final plea for directors to change sides and avoid litigation
Because the voting has been extended by two weeks, it is important that as many people as possible listen to the lunacy of the defenders of the farmer gerrymander. To that end, we've featured the two major ravers from yesterday's EGM:
NSW grower Jock Munro harks back to the second world war
WA's Bob Iffla erroneously invokes Rupert's News Corp gerrymander
Whilst the AWB board have pushed the envelope by extending voting until September 3, we've never before seen such a tight vote on such a vital issue from such a small turn out of just 27%.
It wasn't clear how many shares would have been voted at the meeting or which way the open proxies would have gone but this is how the farmer votes were positioned, remembering that success required a 75% super-majority;
For: 10,346
Against: 3,968
Open: 1,485
The directed proxies in favour were 72.28% against when excluding the open proxies but rose to 74.88% when including all the open proxies, so it might have been that there were a few open proxies not with the chairman that led to the public figure of 74.7%.
That said, there are more than 18,000 different farmer shareholders who control about 58,000 votes so both sides will now be chasing the 40,000-plus votes that haven't yet been cast.
Based on the ineptitude of the no case yesterday, it's hard to see them generating much more support but this fight won't be over until the fat lady sings and any subsequent court challenges have been defeated. Once that happens, AWB shares will start to rise as institutional shareholders get back on board.
Gunns and ABC Learning go into the weekend suspended
Two of Australia's most controversial companies, ABC Learning and Gunns, have gone into the weekend suspended from trading and with serious doubts hanging over their respective futures.
For Eddie Groves and ABC Learning, we're looking at yet another write-down forced by new auditor Brian Long from Ernst & Young. The statement warning about this did not sound at all promising.
Gunns is sinking under more than $1 billion in debt with fast disappearing political protection and a plunging share price as it desperately tries to raise up to $400 million BEFORE considering how on earth to fund the $2 billion pulp mill.
Nick Clark from The Mercury had a good summary of where it all went wrong for Gunns in today's paper and have a listen to this discussion with Tim Cox on ABC Tasmania yesterday morning.
The expanding $100m loss club
Insurance Australia Group and OZ Minerals have both joined the $100 million loss club for 2007-08, meaning we are now up to 13 so far, just shy of the record 15 in 2001-02. With the likes of Allco Finance Group and various other teetering financial engineering vehicles still to report, the final figure could yet hit 20.
IAG was a classic new broom balance sheet axe job as Mike Hawker took a $400 million write down and restructuring charge to generate a $261 million net loss.
The OZ Minerals effort was a real dogs breakfast, but the final outcome was a $543 million net loss for the second half after the book value of Andrew Michelmore's first Zinifex move, the $905 million takeover of Allegiance Mining, was written down to a miserable $466 million and already looks like a lemon.
Owen Hegarty's $8.35m farewell gift
I've seen some outrageous things over the years but the decision by the OZ Minerals board to give Owen Hegarty an $8.35 million ex gratia payout is right up there.
If ever the Rudd Government needed a reason to change the law on shareholder approval for CEO payouts, then here it is. Hegarty's original $10.7 million payout was comprehensively rejected by shareholders, so the board has just lowered it marginally to come under the approval threshhold which is 7 times the average salary over the previous three years. It's time to give shareholders the vote on any CEO payout above $1 million.
The OZ Minerals press release didn't even acknowledge the historic shareholder revolt. We all know that Oxiana turned OZ Minerals chairman Barry Cusack is a huge fan of Hegarty but how could the full board justify this? Peter Mansell, the former Zinifex chairman and current chairman of the OZ Minerals remuneration committee, clearly needs to publically explain how this happened and the legal basis behind the decision.
Afterall, Hegarty only has 5 more months to serve as chairman of the merger integration committee and is already off playing in new mining ventures. Why does a company that just declared a $543 million half year loss decide to gift its former CEO $8.35 million when there was no contractual requirement?
Another interesting question is the legal basis of the deal. Given that Hegarty was a non-executive director at the time the board made its decision, surely it is in breach of the NED pay cap approved by shareholders?
This one has plenty to run and the institutional shareholders above 5% such as Merrill Lynch, Axa and Barclays really should be coming off the long run.
Another woeful outcome from the CDPP
Finally today, the Commonwealth DPP has had another woeful outcome in court after the biggest financial planner behind Westpoint, Neil Burnard, got off with a 12-month suspended sentence and $50,000 fine. No wonder ASIC's press release this afternoon opened with its intentions to appeal.
Crikey's Adam Schwab gave ASIC and the CDPP this fearsome bollocking after they achieved an equally bad result in the Wallace Cameron case a few weeks back.
The regulators clearly need to do a lot better when it comes to locking up suits, because very few additions are being made to our ASIC jail list, despite the extraordinary collapses and controversies of recent months.
That's all for now.
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.