Bank bashing, governance conference, John Barassi, Manningham, dud directors, ABC Learning and selling shares
February 2, 2010
Dear Mayne Reporters,
Apologies there has been nothing since this 2am effort on Monday morning, but the schedule has been pretty packed since the shock win in the Manningham Council elections over the weekend.
Laying into the latest bank cartel gouge
As a bank basher from way back, it was very satisfying to get stuck into the gouging cartel on A Current Affair last night over exit fees on fixed rate mortgages. (Watch the story on the NineMSN website by clicking on the video featuring the ING logo.)
For 60,000 Australians who have locked in, many are now suffering huge losses after effectively guaranteeing to hedge on the downside if interest rates fell.
The banks have dropped billions from the collapsing Aussie dollar (see Tony Boyd's Centro story this morning), but in this case the hedging strategies on interest rates appear to have left the risk with their screaming customers.
And with interest rates falling faster than ever before, there is a big issue around the timing. This is where A Current Affair really nailed the Commonwealth Bank by following a customer into the Martin Place branch yesterday where he was told that a $35,000 exit fee had suddenly jumped to $50,000 in the space of six hours. This was tabloid television at its best with the victim labelling CBA "scum and vermin".
The big question is precisely when someone has deemed to cancel their contract and precisely what they were told when signing the contract.
The Mayne Report has been contacted by Walter Shamsabadi, a customer of ANZ Bank who has five different home loans. This chap has previously been on A Current Affair, but the program excised all mention of ANZ which happens to be a big advertiser on NineMSN.
At the time of his first interview with A Current Affair in early November, Walter was up for a $128,000 exit fee. A week later it rose to $149,000 and then last week $170,000 and now close to $200,000 after the Reserve Bank's 100 basis point cut yesterday.
However, when Walter first heard that rates were dropping, he called ANZ to break the contract. At the time, the fixed rates were 8.09% and 8.34% on the 5 loans and the bank was still marketing new 5 year loans at 8.54%. So, how on earth can ANZ charge a huge break fee to exit a fixed rate loan at the same time as it is offering new fixed rate loans at a higher price?
Walter immediately advised his sister to get out of her fixed rate loan with Bendigo Bank and she only copped a $200 administration fee. Clearly, Bendigo must have hedged on the downside and passed on the benefit to its customers.
If ANZ and the other big banks also took out hedging on the downside, then they are clearly double dipping with these exorbitant break fees.
Finally, it was amusing to see John Barassi, an old tennis doubles partner from school, featured in The Australian's page one picture story today as someone with a $1 million mortgage in Sydney who will benefit from lower interest rates.
However, John is definitely not 36 as our year were all born in 1969 and 1970.
Big governance conference in Sydney
The big annual governance conference put on by Chartered Secretaries Australia has been unfolding in Sydney over the past two days. Unfortunately, I had to cancel attending a session on AGMs with NRMA President Alan Evans and Regnan boss Erik Mather yesterday due to Manningham Council commitments where the new councillors were briefed by the CEO and divisional directors from 6pm last night.
However, I ended up doing the 75 minute panel discussion on the phone and it was a very lively debate, although this description of the session was quite bizarre:
Australia's growing shareholder activism
AGMs provide a convenient forum for minority shareholders to introduce resolutions for shareholder votes, to change company practice and generate media attention for their cause against standing policy at a company's expense. The resolution process is powerful because it allows for strong questioning by shareholders, which can put company leadership on the spot. But how do you avoid a public relations disaster?
Whoever came up with that clearly doesn't understand the 100 signature rule, because there have only been about 10 shareholder resolutions put up to ASX200 companies over the past 20 years. It has only ever been done by unions, green groups and the Australian Shareholders' Association. We need to make it easier for shareholder resolutions with a rule like the American requirement that you own $US2000 worth of shares for more than 12 months.
The only reason I run for boards so often is because it requires just one shareholder signature. It would be far better to put up specific resolutions but the logistics of getting 100 wet signatures from shareholders is just too hard. Twelve months into its term and the Rudd Government has shown no sign of moving on this front.
Gonski's defends Barbara Ward as John Story remains in denial over Suncorp protest
ASX chairman David Gonski and Australian Institute of Company Directors President John Story had both been quite controversial in earlier sessions at the CSA conference. Story is chairman of Suncorp and complained about protest votes against the Suncorp remuneration report being too generalised. The bloke clearly still doesn't understand that the hurdles on the performance shares for Suncorp executives such as CEO John Mulcahy should not have been waived after the Promina takeover.
Suncorp features prominently twice on this list of the biggest remuneration report protest votes and clearly shareholders should consider voting against Story's re-election in 2010 if he doesn't heed the message.
Meanwhile, Gonski launched an attack on governance adviser RiskMetrics for targeting new Qantas director Barbara Ward. Funnily enough, the one meeting I've had with Gonski was at a roundtable about the AGM put on by the CSA earlier this year and seated next door was none other than Barbara Ward. This was shortly after she'd quit the Allco Finance Group board on January 25 without providing any explanation.
Gonski's big defence was essentially that just because a particular orchestra falls apart, doesn't mean there aren't still individually brilliant violinists performing.
Well, maybe. The problem with Barbara Ward is that she was a two time offender. Not only was she one of the three independent directors who specifically approved Allco Finance Group's notorious Rubicon acquisition at an EGM less than 12 months ago, she was also chair of the Multiplex audit committee when the massive Wembley Stadium debacle unfolded.
Dud violinists at ABC Learning and Oz Minerals
As a general rule, individual directors should not be sin binned because a company lost some value on a bad business decision. However, once you get multiple disasters, it is a different matter.
And you always must look at the individual circumstances. The ABC Learning situation was so outrageous it is impossible to see how David Ryan - the chairman when it collapsed and audit committee chairman since 2005 - can possibly sit on any other public company board again, let alone remain chairman of Transurban and a director of Lend Lease with recent endorsements from shareholders of 66% and 71% respectively. At the very least he must publically explain what happened but so far he has refused to comment whilst still copping about $500,000 a year from his remaining board gigs
The same goes for Oz Minerals chairman Barry Cusack. After trumpeting this $12 billion merger of Oxiana and Oz Minerals, Cusack proposed a $10.7 billion golden goodbye for founder Owen Hegarty, which was based on assumptions that the share price would top $6 by 2010. Shareholders overwhelmingly voted this down, so Cusack turned around and gave his old mate $8.4 million anyway. Oz Minerals then blundered over its disclosure of Hegarty's margin call sell-down and last traded at 55c before it was suspended on November 28. This was because of emergency negotiations with its banks, something that came as a complete shock to the market which was used to the company talking about its huge cash deposits.
Have presided over this monumental debacle, Cusack should resign today. The lad also copped a 21% protest vote at the recent McMahon Holdings AGM and will be voted off the Toll Holdings board in 2010 if he doesn't resign first.
Radio interviews about Manningham Council result
I've been generally very positive about serving on Manningham Council and was genuinely impressed with the acceptance speeches delivered by the nine winning candidates at Monday night's declaration of the poll, plus the briefings and council discussions last night.
Then along comes The Age and takes two general quotes about local government as if these were specific issues in Manningham when the following appeared yesterday:
In the Manningham City Council election, serial candidate and shareholder activist Stephen Mayne was elected on an anti-pokies, increased council transparency and lower rates platform. "It's a pleasant surprise, I am very happy about it," Mr Mayne said about his victory after 10 years and 37 consecutive defeats in a swag of electoral battles.
Mr Mayne called for greater scrutiny of council performance and the establishment of an independent commission against corruption.
"I think it is very important to have good governance procedures in local government to fish out the troublemakers and the destructive processes," he said. "I am very much a believer in the fact that we need an ICAC that can scrutinise local governments that do lose the plot."
Insofar as Manningham is concerned, I've never raised any issues about corruption or disruptive councillors. As you can tell from these four interviews, the direct quotes about Manningham on radio have been strongly supportive:
774 ABC Melbourne with Libby Gore
702 ABC Sydney with Deborah Cameron
4BC Brisbane with Mike Smith
774 ABC Melbourne with Ali Moore
The detailed briefing last night with the new council went well and I'm seeing the CEO Lydia Wilson at 11am this morning. There are also ongoing discussions with individual councillors on the question of who will be mayor. We have six new councillors and three who were returned for another term. There is more than one candidate for mayor, but I'm not one of them.
As a general rule, The Mayne Report will not be going chapter and verse into the detailed workings of Manningham Council, but we will keep you up to date on any public developments as they unfold, as long as this doesn't cause any problems with colleagues.
Full audio of recent radio interviews
The full versions of those four interviews above that touched on Manningham are as follows:
Listen to chat with Libby Gore on 774 ABC Melbourne yesterday, including a solid session on fixed rate mortgages and even a mention of the big Centro Retail vote.
Listen to regular chat with Deborah Cameron on 702 ABC Sydney yesterday about the state of the economy, interest rate cuts, executive pay and the failed BHP-Rio merger.
Listen to Monday's discussion about BHP merger costs, Babcock & Brown and Elizabeth Nosworthy with Mike Smith on 4BC Brisbane.
There will also be a discussion with Tim Cox on ABC Tasmania at 8.40am this morning on the Qantas-BA merger.
ABC Learning Creditors Meeting Minutes
If you didn't believe that your correspondent had really cracked the ABC Learning creditors' committee, read the minutes to see for yourself.
Selling down on fears market could fall more
The paper losses on the sharemarket have now topped $100,000 and I've turned bearish. How do we know that bank stocks won't halve from here if there is a housing crash and unemployment soars? For instance, this cracking story by Tony Boyd on Business Spectator suggests that both NAB and ANZ have suffered huge blowouts in their Centro exposures due to the crashing Australian dollar.
If banks all over the world have been bailed out, it could happen in Australia too. Ask yourself the question: where will the All Ords be if a Big Four banks declares a loss due to soaring bad debts, abandons dividends payouts and requires an equity injection from the Federal Government?
For this reason, whenever the market ticks higher, I've been selling and here are the most recent trades:
December 1
SDI Ltd: sold 435 at $1.03
November 27
Webjet: sold 435 at $1.03
Mermaid Marine Australia: sold 461 at 92.5c
November 26
Oncard International: sold 4,500 at 12c
Does Elizabeth Nosworthy still believe she is independent?
It's good to see The Australian getting stuck into the obvious conflicts of interest that Babcock & Brown chair Elizabeth Nosworthy has as chair of the Queensland Water Commission. Throw in the GPT debacle and the collapse of Commander Communications, which she also chaired, and Nosworthy shouldn't be serving on any boards.
Watch this video when we took her on over this lack of independence at the 2008 Babcock & Brown AGM. She was very combative and defensive.
Sky Business News following the Centro AGM
The Centro Retail Ltd AGM was another failed board tilt but we did manage 71% of the independent vote. Watch this Ahren Young story on Sky Business Report after the meeting.
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.
Apologies there has been nothing since this 2am effort on Monday morning, but the schedule has been pretty packed since the shock win in the Manningham Council elections over the weekend.
Laying into the latest bank cartel gouge
As a bank basher from way back, it was very satisfying to get stuck into the gouging cartel on A Current Affair last night over exit fees on fixed rate mortgages. (Watch the story on the NineMSN website by clicking on the video featuring the ING logo.)
For 60,000 Australians who have locked in, many are now suffering huge losses after effectively guaranteeing to hedge on the downside if interest rates fell.
The banks have dropped billions from the collapsing Aussie dollar (see Tony Boyd's Centro story this morning), but in this case the hedging strategies on interest rates appear to have left the risk with their screaming customers.
And with interest rates falling faster than ever before, there is a big issue around the timing. This is where A Current Affair really nailed the Commonwealth Bank by following a customer into the Martin Place branch yesterday where he was told that a $35,000 exit fee had suddenly jumped to $50,000 in the space of six hours. This was tabloid television at its best with the victim labelling CBA "scum and vermin".
The big question is precisely when someone has deemed to cancel their contract and precisely what they were told when signing the contract.
The Mayne Report has been contacted by Walter Shamsabadi, a customer of ANZ Bank who has five different home loans. This chap has previously been on A Current Affair, but the program excised all mention of ANZ which happens to be a big advertiser on NineMSN.
At the time of his first interview with A Current Affair in early November, Walter was up for a $128,000 exit fee. A week later it rose to $149,000 and then last week $170,000 and now close to $200,000 after the Reserve Bank's 100 basis point cut yesterday.
However, when Walter first heard that rates were dropping, he called ANZ to break the contract. At the time, the fixed rates were 8.09% and 8.34% on the 5 loans and the bank was still marketing new 5 year loans at 8.54%. So, how on earth can ANZ charge a huge break fee to exit a fixed rate loan at the same time as it is offering new fixed rate loans at a higher price?
Walter immediately advised his sister to get out of her fixed rate loan with Bendigo Bank and she only copped a $200 administration fee. Clearly, Bendigo must have hedged on the downside and passed on the benefit to its customers.
If ANZ and the other big banks also took out hedging on the downside, then they are clearly double dipping with these exorbitant break fees.
Finally, it was amusing to see John Barassi, an old tennis doubles partner from school, featured in The Australian's page one picture story today as someone with a $1 million mortgage in Sydney who will benefit from lower interest rates.
However, John is definitely not 36 as our year were all born in 1969 and 1970.
Big governance conference in Sydney
The big annual governance conference put on by Chartered Secretaries Australia has been unfolding in Sydney over the past two days. Unfortunately, I had to cancel attending a session on AGMs with NRMA President Alan Evans and Regnan boss Erik Mather yesterday due to Manningham Council commitments where the new councillors were briefed by the CEO and divisional directors from 6pm last night.
However, I ended up doing the 75 minute panel discussion on the phone and it was a very lively debate, although this description of the session was quite bizarre:
Australia's growing shareholder activism
AGMs provide a convenient forum for minority shareholders to introduce resolutions for shareholder votes, to change company practice and generate media attention for their cause against standing policy at a company's expense. The resolution process is powerful because it allows for strong questioning by shareholders, which can put company leadership on the spot. But how do you avoid a public relations disaster?
Whoever came up with that clearly doesn't understand the 100 signature rule, because there have only been about 10 shareholder resolutions put up to ASX200 companies over the past 20 years. It has only ever been done by unions, green groups and the Australian Shareholders' Association. We need to make it easier for shareholder resolutions with a rule like the American requirement that you own $US2000 worth of shares for more than 12 months.
The only reason I run for boards so often is because it requires just one shareholder signature. It would be far better to put up specific resolutions but the logistics of getting 100 wet signatures from shareholders is just too hard. Twelve months into its term and the Rudd Government has shown no sign of moving on this front.
Gonski's defends Barbara Ward as John Story remains in denial over Suncorp protest
ASX chairman David Gonski and Australian Institute of Company Directors President John Story had both been quite controversial in earlier sessions at the CSA conference. Story is chairman of Suncorp and complained about protest votes against the Suncorp remuneration report being too generalised. The bloke clearly still doesn't understand that the hurdles on the performance shares for Suncorp executives such as CEO John Mulcahy should not have been waived after the Promina takeover.
Suncorp features prominently twice on this list of the biggest remuneration report protest votes and clearly shareholders should consider voting against Story's re-election in 2010 if he doesn't heed the message.
Meanwhile, Gonski launched an attack on governance adviser RiskMetrics for targeting new Qantas director Barbara Ward. Funnily enough, the one meeting I've had with Gonski was at a roundtable about the AGM put on by the CSA earlier this year and seated next door was none other than Barbara Ward. This was shortly after she'd quit the Allco Finance Group board on January 25 without providing any explanation.
Gonski's big defence was essentially that just because a particular orchestra falls apart, doesn't mean there aren't still individually brilliant violinists performing.
Well, maybe. The problem with Barbara Ward is that she was a two time offender. Not only was she one of the three independent directors who specifically approved Allco Finance Group's notorious Rubicon acquisition at an EGM less than 12 months ago, she was also chair of the Multiplex audit committee when the massive Wembley Stadium debacle unfolded.
Dud violinists at ABC Learning and Oz Minerals
As a general rule, individual directors should not be sin binned because a company lost some value on a bad business decision. However, once you get multiple disasters, it is a different matter.
And you always must look at the individual circumstances. The ABC Learning situation was so outrageous it is impossible to see how David Ryan - the chairman when it collapsed and audit committee chairman since 2005 - can possibly sit on any other public company board again, let alone remain chairman of Transurban and a director of Lend Lease with recent endorsements from shareholders of 66% and 71% respectively. At the very least he must publically explain what happened but so far he has refused to comment whilst still copping about $500,000 a year from his remaining board gigs
The same goes for Oz Minerals chairman Barry Cusack. After trumpeting this $12 billion merger of Oxiana and Oz Minerals, Cusack proposed a $10.7 billion golden goodbye for founder Owen Hegarty, which was based on assumptions that the share price would top $6 by 2010. Shareholders overwhelmingly voted this down, so Cusack turned around and gave his old mate $8.4 million anyway. Oz Minerals then blundered over its disclosure of Hegarty's margin call sell-down and last traded at 55c before it was suspended on November 28. This was because of emergency negotiations with its banks, something that came as a complete shock to the market which was used to the company talking about its huge cash deposits.
Have presided over this monumental debacle, Cusack should resign today. The lad also copped a 21% protest vote at the recent McMahon Holdings AGM and will be voted off the Toll Holdings board in 2010 if he doesn't resign first.
Radio interviews about Manningham Council result
I've been generally very positive about serving on Manningham Council and was genuinely impressed with the acceptance speeches delivered by the nine winning candidates at Monday night's declaration of the poll, plus the briefings and council discussions last night.
Then along comes The Age and takes two general quotes about local government as if these were specific issues in Manningham when the following appeared yesterday:
In the Manningham City Council election, serial candidate and shareholder activist Stephen Mayne was elected on an anti-pokies, increased council transparency and lower rates platform. "It's a pleasant surprise, I am very happy about it," Mr Mayne said about his victory after 10 years and 37 consecutive defeats in a swag of electoral battles.
Mr Mayne called for greater scrutiny of council performance and the establishment of an independent commission against corruption.
"I think it is very important to have good governance procedures in local government to fish out the troublemakers and the destructive processes," he said. "I am very much a believer in the fact that we need an ICAC that can scrutinise local governments that do lose the plot."
Insofar as Manningham is concerned, I've never raised any issues about corruption or disruptive councillors. As you can tell from these four interviews, the direct quotes about Manningham on radio have been strongly supportive:
774 ABC Melbourne with Libby Gore
702 ABC Sydney with Deborah Cameron
4BC Brisbane with Mike Smith
774 ABC Melbourne with Ali Moore
The detailed briefing last night with the new council went well and I'm seeing the CEO Lydia Wilson at 11am this morning. There are also ongoing discussions with individual councillors on the question of who will be mayor. We have six new councillors and three who were returned for another term. There is more than one candidate for mayor, but I'm not one of them.
As a general rule, The Mayne Report will not be going chapter and verse into the detailed workings of Manningham Council, but we will keep you up to date on any public developments as they unfold, as long as this doesn't cause any problems with colleagues.
Full audio of recent radio interviews
The full versions of those four interviews above that touched on Manningham are as follows:
Listen to chat with Libby Gore on 774 ABC Melbourne yesterday, including a solid session on fixed rate mortgages and even a mention of the big Centro Retail vote.
Listen to regular chat with Deborah Cameron on 702 ABC Sydney yesterday about the state of the economy, interest rate cuts, executive pay and the failed BHP-Rio merger.
Listen to Monday's discussion about BHP merger costs, Babcock & Brown and Elizabeth Nosworthy with Mike Smith on 4BC Brisbane.
There will also be a discussion with Tim Cox on ABC Tasmania at 8.40am this morning on the Qantas-BA merger.
ABC Learning Creditors Meeting Minutes
If you didn't believe that your correspondent had really cracked the ABC Learning creditors' committee, read the minutes to see for yourself.
Selling down on fears market could fall more
The paper losses on the sharemarket have now topped $100,000 and I've turned bearish. How do we know that bank stocks won't halve from here if there is a housing crash and unemployment soars? For instance, this cracking story by Tony Boyd on Business Spectator suggests that both NAB and ANZ have suffered huge blowouts in their Centro exposures due to the crashing Australian dollar.
If banks all over the world have been bailed out, it could happen in Australia too. Ask yourself the question: where will the All Ords be if a Big Four banks declares a loss due to soaring bad debts, abandons dividends payouts and requires an equity injection from the Federal Government?
For this reason, whenever the market ticks higher, I've been selling and here are the most recent trades:
December 1
SDI Ltd: sold 435 at $1.03
November 27
Webjet: sold 435 at $1.03
Mermaid Marine Australia: sold 461 at 92.5c
November 26
Oncard International: sold 4,500 at 12c
Does Elizabeth Nosworthy still believe she is independent?
It's good to see The Australian getting stuck into the obvious conflicts of interest that Babcock & Brown chair Elizabeth Nosworthy has as chair of the Queensland Water Commission. Throw in the GPT debacle and the collapse of Commander Communications, which she also chaired, and Nosworthy shouldn't be serving on any boards.
Watch this video when we took her on over this lack of independence at the 2008 Babcock & Brown AGM. She was very combative and defensive.
Sky Business News following the Centro AGM
The Centro Retail Ltd AGM was another failed board tilt but we did manage 71% of the independent vote. Watch this Ahren Young story on Sky Business Report after the meeting.
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.