Risk Metrics conference, Oz Minerals tilt, Westfield pay, Cornwall cartoon, Rich List, better trading profits and much more
February 2, 2010
Dear Mayne Reporters,
First up this week, check out this comprehensive 1500-word piece written for Fairfax's www.businessday.com.au website yesterday which has laid down some important markers for the coming AGM mini-season.
It has been viewed more than 32,000 times and presumably quite a few of them are from within the Westfield, AMP and Rio Tinto camps given the predictions about embarrassing shareholder revolts that will unfold over the coming weeks.
Given that even Macquarie Group has today further modified its bonus system to reduce the cash component and increase the focus on longer term equity issues, it is hard to see how on earth Westfield founder and executive chairman Frank Lowy can continue to pocket more than $16 million a year in salary and incentive payments. Only Rupert Murdoch's $30 million annual whack is more outrageous.
You've also got to ask whether David Gonski is an appropriate ASX chairman when he sits on the Westfield remuneration committee which has just extended Lowy's contract for another 12 months. Talk about being out of touch with the community and political debate - let alone Westfield shareholders who have watched the share price halve over the past year.
The Fairfax business websites sure do drive strong traffic. This audio file of the battle with Frank Lowy over executive pay at last year's AGM has been downloaded more than 600 times over the past 24 hours. The exchange certainly does set the scene nicely for the showdown on May 6 in Sydney when the Westfield remuneration report will probably only be saved by the Lowy family voting their 8% stake in favour.
Rating the best and worst directors
The annual Risk Metrics corporate governance conference was another lively affair yesterday with the rankings of best non-executive directors as measured by total shareholder return featuring as the main display on the front of The Age's business section today.
Risk Metrics hasn't yet revealed the names of the directors who featured in the bottom quartile but these slides presented yesterday by research director Martin Lawrence show the huge difference between the best performed directors based on TSR for the 7 years to 2007, and those selected by Andrew Cornell for The AFR Magazine's so-called Dream Team board.
The Mayne Report's Dream Team of best directors is certainly very different again to those identified by Risk Metrics and The AFR.
Future Fund chairman David Murray was absolutely right yesterday when he said that the single most important thing institutional shareholders should focus on is the quality of directors that represent them on boards.
Whilst measuring TSR is interesting, there are so many carve-outs, qualifications and rogue statistics that you would be reluctant to base voting decisions exclusively on the data. Of course the likes of Elizabeth Nosworthy should be booted from all boards after three of her companies finished up in administration, but how do you identify poorly performing directors on companies that might be performing well under a strong management team?
I told the conference that the best way to assess director performance would be an anonymous survey of the top 200 directors each year which required them to nominate one board colleague they rated as doing a good job and one who is not contributing enough. Whenever I give a speech at a major conference, the participants fill in their feed-back form and then this is passed back, so why apply the same system to boards.
It's hard to go past peer review and this system would send institutional investors warning signals about directors that need to be moved on with a quiet tap on the shoulder counselling them to spend more time with the family.
It's time we had a really good debate on the performance of non-excecutive directors so let's hope Risk Metrics plucks up the courage to reveal the names of those at the bottom of the class whilst also recommending against a few more directors this coming AGM mini-season.
Oz Minerals board tilt - but will there be an AGM?
Just as Treasurer Wayne Swan was dropping his proverbial bomb by blocking the MinMetals bid for Oz Minerals last Friday, I was formally nominating for election to the board of the teetering miner. With Centro Retail not doing the right thing in recognising last year's mandate and putting me on their board, I'm back in the game looking for corporate governance turnaround situations. The proposed platform reads as follows:
Mr Mayne is standing for the Oz Minerals board as a catalyst for change. There needs to be more boardroom accountability for the company's precarious financial position and the decision last year to ignore an overwhelming shareholder vote and award an $8.3 million separation payment to former Oxiana Resources managing director Owen Hegarty.
There hasn't been a situation quite like this one before because the AGM date in late May still hasn't been revealed and the company could be in administration or taken over before shareholders get to pass judgment on the board. Today we've got news of another proposal from MinMetals to buy everything except Prominent Hill, Martabe and listed investments such as Toro Energy. The stock has been suspended yet again and we'll hopefully get more details tomorrow.
If the Oz Minerals AGM does proceed, former Zinifex and WA News chairman Peter Mansell would be wise not to seek another three year term. As chairman of the Oz Minerals remuneration committee he will go close to defeat given the simmering anger over the $8.4 million golden goodbye paid to former Oxiana Resources CEO Owen Hegarty last year. Besides, Mansell is the second busiest man in corporate Australia after Sir Rod Eddington and didn't win any many friends with the way he chaired WA News over the past few years before surrending meekly to Kerry Stokes.
Let's hope the prospect of major protests against the four Oz Minerals incumbents and an external candidate lobbing grenades doesn't spark any rash decisions that avoid the AGM showdown.
Cornwall cartoons for The Mayne Report
We're delighted to welcome seasoned cartoonist Mark Cornwall to The Mayne Report. Mark drew many hundreds of excellent toons for Crikey over the years before returning to teaching, but he's keen to get back into the game and we're delighted to have him.
Computershare drags the chain on electronic voting
Computershare CEO Stuart Crosby bravely fronted the Risk Metrics conference yesterday but he won't have enjoyed the experience which saw a range of participants rail against Australia's largely manual corporate voting system.
Indeed, if you read this corporate governance report released by AMP at yesterday's conference, it is not happy that 4% of all votes seem to routinely go missing thanks to the cumbersome manual processing system.
Asciano company secretary Fiona Mead also raised plenty of concerns about the system and everyone was left asking the question about why there hasn't been much movement to introduce a fully electronic voting system with a complete audit trail, given that an industry working party recommended precisely that a couple of years ago.
Crosby sheeted the blame home to some anachronistic laws and talked at length about all the problems with other systems around the world without ever really addressing the point that he's the world's biggest share registry provider who apparently doesn't want to open up the system and potentially jeopardise those fat profit margins.
This latest engagement with Computershare was largely triggered by this unflattering article in The AFR last year by Risk Metrics boss Dean Paatsch who likened vote processing in Australia to "a back office brothel". That led to this exchange at the Computershare AGM last November and then the appearance by Crosby yesterday.
Well done for fronting up, Stuart, but there needs to be a lot more movement at the station.
AMP's corporate voting report as David Murray dodges Centro conflict
AMP's Michael Anderson presented at yesterday's conference alongside Stuart Crosby and also released AMP's latest voting report, which is well worth a read. Given that AMP is voluntarily revealing its voting patterns with major ASX listed company - and voting against more than one third of all pay resolutions - it begs the question whether compulsory disclosure of institutional voting is the way to go.
After all, US mutuals have to reveal this sort of detail. Given that more than $1 trillion in superannuation money has been compulsorily confiscated from Australians and their employers, we do need more transparency around voting.
AMP is best of breed in the Australian market but it's time to move beyond a voluntary approach on disclosure. For instance, I'd really like to know how the Commonwealth Bank votes its 7% stake in Westfield on the remuneration report at the AGM next month. Under our current system, this will remain secret funds manager's business.
I asked David Murray yesterday about the conflicts surrounding banks getting into the funds management business yesterday and specificially mentioned the example of Centro where ComBank has more than $1 billion of loan exposures and had invested about $600 million of superannuation funds into Centro on the equity site. Surely debt and equity are in conflict when you get to work out situations.
Murray dodged the question, but did defend voting processes at CBA, saying that the board never interfered with the fund managers.
That's not the point. It's like saying Rupert Murdoch never tells his News Ltd editor not to criticise the company's operations. The Colonial fund manager who voted that key swing stake in favour of the BHP-Billiton merger back in 2001 knew that opposing the deal would have embarrassed then CBA chairman John Ralph, given that he was one of the BHP directors urging all shareholders to vote in favour.
Mayne Report video blog
This week we interviewed Dean Paatsch from Risk Metrics after the 2009 Risk Metrics Governance conference which covered everything from executive pay, to proxy voting, corporate governance, short selling and director performance. We also delved into the video archive and found an old appearance on the ABC's Difference of Opinion from September 20, 2007. Some of the predictions and summaries are quite prophetic considering the state of the financial world . An interesting watch.
The Mayne Report Rich List
Since we began compiling the Mayne Report Rich List documenting every Australian currently or previously worth more then $10 million, it has grown in numbers and popularity.
The Mayne Report Rich List was born on August 14, 2007 when it only had 345 names. We're now up to 1332 entries, although some are italicised, denoting that they are now longer worth more than our $10 million cut off.
Last Thursday BRW magazine released the Top 200 Executives Rich List, which was another excellent read. Comparable to the Mayne Report Rich List, we had 150 names already on our list, so here are latest entries courtesy of BRW:
Tony Alford: CEO and managing director of the Retail Food Group which owns the Donut King and Brumby's Bakeries franchises, he has a shareholding of around 22 million or 30%. The stock peaked at almost $2.10 in October 2007 when he was worth more than $40 million, and bottomed at 90c in December 2008 but is now improving.
Ian Ballis: purchased the former Ford chassis component plant in North Geelong for $7.1 million, which is a bargain considering the previous owners, Queensland-based City Pacific, paid around $18 million for the site in 2007.
Greg Bartlett: executive director of Westpac who owns about 840,000 shares. The stock peaked at almost $31 in December 2007 when he was worth more than $25 million, and bottomed at $15 in February 2009 but is now improving.
Steve Beardsall: managing director of Queensland-based coal seam gas exploration company Pure Energy Resources, he has a shareholding of around 3.6 million. The stock peaked at almost $9 in February 2009 when he was worth more than $40 million, but bottomed at 50c in April 2008.
Larry Benke: executive director of Worley Parsons whose shareholding is around 1.2 million. The stock peaked at almost $53 in December 2007 when he was worth more than $60 million, and bottomed at $11 in December 2008 but is now improving.
Graeme Blackman: chairman of Melbourne-based pharmaceutical company, IDT Australia, he has a shareholding of around 6 million. The stock peaked at almost $2.60 in December 2007 when he was worth more than $12 million, and bottomed at $1.50 in March 2009 but has since improved.
Maurice Brand: managing director of Perth-based Liquefied Natural Gas, he has a shareholding of around 11 million. The stock peaked at almost $1.25 in June 2008 when he was worth more than $12 million, and bottomed at 35c in December 2008 but has since improved.
Bill Bridges: Sydney-based real estate agent of Cassim Real Estate sold a prominent harbourside home in 2008 for a record of $45 million. He is selling the 100-year family home of the Fairfax famiy for an estimated $60 million and has made millions clipping the ticket on these big property deals for years.
Paul Bridgwood: director of Perth-based Liquefied Natural Gas, he has a shareholding of around 13 million. The stock peaked at almost $1.25 in June 2008 when he was worth more than $15 million, and bottomed at 35c in December 2008 but has since improved.
Andrew Buckley: managing director of Brisbane-based integrated professional services provider Cardno, he has shareholding of around 2.4 million. The stock peaked at almost $8 in December 2007 when he was worth more than $15 million, and bottomed at $2.60 in March 2009 but has marginally improved.
John Chan: managing director of the Perth-based property developer Finbar Group, who has a shareholding of nearly 19 million. The stock peaked at almost $1.05 in June 2006 when he was worth more than $18 million, and bottomed at 45c in December 2008 but has since improved.
Phillip Cronican: exceutive director of Westpac whose shareholding is around 608,000. The stock peaked at almost $31 in December 2007 when he was worth more than $17 million, and bottomed at $15 in February 2009 but is now improving.
Nicholas Davies: of Arrow Energy, one of Australia's leading producers of coal seam methane gas, has a shareholding of around 4.8 million. The stock peaked at almost $4 in June 2008 when he was worth more than $18 million, and bottomed at $1.80 in October 2008 but is now improving.
Geoffrey Davis: managing director of WA-based Medusa Mining, his shareholding is around 3.8 million. The stock peaked at almost $1.80 in March 2009 when he was worth more than $7 million, and bottomed at 4c in December 2008 but has since risen to a significant peak.
David Dix: executive chairman of AED Oil, he has a shareholding of around 48 million. The stock peaked at almost $11.50 in October 2007 when he was worth more than $500 million, and bottomed at 90c in March 2009 but is now marginally improving.
Bruce Dixon: the long-time Healthscope CEO owns shares worth $6.4 million.
Paul Fudge: a former rag trader who purchased a coal-seam gas plot earlier in the decade in Queensland. Coal-seam gas being the 'new gold', he is set to make millions by selling his CSG which is almost next to the Roma-to-Brisbane pipeline. Billions have been spent by the big companies buying up as much CSG as possible, so he stands to make a fortune.
Warren Gilmour: director of WA-based mining and materials company, Andean Resources, has a shareholding of around 11 million. The stock peaked at almost $2.30 in December 2007 when he was worth more than $22 million, and bottomed at 50c in December 2008 but is now improving.
Lim Kim Hai: executive chairman of the regional airline service, Rex Express, he has a shareholding of around 25 million or 20% of the company. The stock peaked at almost $2.80 in October 2007 when he was worth more than $60 million, and bottomed at 85c in March 2009 but is improving.
Daryl Holmes: director of Queensland-based administration and management systems company, 1300 smiles, has a shareholding of around 15 million shares or 75% of the company. The stock peaked at almost $3.40 in July 2007 when he was worth more than $80 million, and bottomed at $2.20 in November 2008 but has since improved.
John Houston: chairman of Sydney-based telecommunications products and services group, Entertainment Media &Telecoms Corp, he has a shareholding of around 61 million. The stock peaked at almost 50c in August 2008 when he was worth more than $30 million, and bottomed at 20c in March 2009 but is now improving.
Silviu Itescue: director and chief scientific advisor for biotechnology group, Mesoblast, he has shareholding of around 37 million or nearly 35%. The stock peaked at almost $2.50 in February 2007 when he was worth more than $70 million, but bottomed at 50c in April 2008.
Gail Kelly: CEO of Westpac whose shareholding is around 1.5 million. The stock peaked at almost $31 in December 2007 when she was worth more than $45 million, and bottomed at $15 in February 2009 but is now improving.
Reg Kermode: chairman of Sydney-based Cabcharge Australia, he has a shareholding of around 1.1 million. The stock peaked at almost $14 in June 2007 when he was worth more than $14 million, and bottomed at $5.20 in February 2009 but has since improved.
Ross Lane: director of the Sydney-based fashion brand management company, Oroton Group, he has a shareholding of around 9.5 million. The stock peaked at almost $4.50 in November 2007 when he was worth more than $50 million, and bottomed at $2 in February 2009 but is now improving.
Peter Marriott: the long-time ANZ executive owns shares worth about $8 million.
Don Meij: managing director of the Domino's Pizza Enterprise, he has a shareholding of around 3.5 million. The stock peaked at almost $4.20 in June 2006 when he was worth more than $12 million, and bottomed at $2.50 in December 2008 but has since improved.
Lev Mizikovsky: chairman of Queensland-based construction company Tamawood, he has a shareholding of around 22 million. The stock peaked at almost $3.30 in October 2007 when he was worth more than $65 million, and bottomed at $1.50 in February 2009 but has since improved.
Paul Naude: from humble beginnings as a small board shorts manufacturer on the Gold Coast, Billabong International is now a global surf and streetwear conglomerate. Paul is a director with a shareholding of around 1.4 million shares. The stock peaked at almost $18.50 in July 2007 when he was worth more than $25 million, and bottomed at $6.50 in February 2009 but is now marginally improving.
Nigel Nixon: executive director of the Retail Food Group which owns the Donut King and Brumby's Bakeries franchises, he has a shareholding of around 5 million. The stock peaked at almost $2.10 in October 2007 when he was worth more than $10 million, and bottomed at 90c in December 2008 but is now improving.
Rod Pearse: the veteran Boral CEO has a shareholding worth more than $10 million, even after recent weakness courtesy of profit warnings.
Geoff Pigot: a non-executive director of Queensland coal miner Aquila Resources who owns 13 million shares. The stock peaked at almost $17 when he was worth more than $200 million, but is now down to just $3, valuing the stake at about $40 million.
Clive Rabie: group CEO of Sydney-based provider of financial and business management solutions, Reckon, he has a shareholding of around 10 million. The stock peaked at almost $1.60 in January 2008 when he was worth more than $15 million, and bottomed at 85c in October 2008 but has since improved.
Andrew Reitzer: the South African expat and long-time Metcash CEO owns shares worth about $7 million.
Harry Rosen: CEO of Melbourne-based pharmaceutical company, Phosphagenics, he has a shareholding worth about $55 million. The stock peaked at almost 45c in September 2006 when he was worth more than $20 million, and bottomed at 6c in November 2008 but has only marginally improved.
John Schaffer: chairman and manging director of the Perth-based leather and building products company Schaffer Corp, has a shareholding of around 3 million. The stock peaked at almost $9.50 in February 2008 when he was worth more than $25 million, and bottomed at $4 in February 2009 but is now improving.
Ines Scotland: CEO of the Sydney-based Citadel Resource Group, she has a shareholding of around 255 million. The stock peaked at almost 39c in August 2008 when she was worth more than $100 million, and bottomed at 11c in November 2008 but has since improved.
Phillip Sidney: managing director of Melbourne-based renewable energy product manufacturer Quantum Energy, has a shareholding of around 683 million. The stock peaked at almost 15c in December 2006 when he was worth more than $65 million, and bottomed at 3.5c in February 2008 but has since improved.
Wayne Sidwell: exceutive chairman and CEO of the Melbourne-based specialty printing services, Wellcom Group, has a shareholding of around 25 million. The stock peaked at almost $3.20 in June 2007 when he was worth more than $80 million, and bottomed at $1.50 in February 2009 but has since improved.
Mark Smith: owns about $6.5 million worth of Karoon Gas shares.
Kong Chong Soon: chairman of the WA-based property development company United Overseas Australia who has a shareholding of around 195 million or 5.9%. The stock peaked at almost 36c in January 2008 when he was worth more than $65 million, and bottomed at 9c in January 2009 but has since improved.
Charles Stinger: owns about $11.3 million worth of shares in Probiotic.
Andrew Stock: significant shareholder in Origin Energy, with around 463,00 shares. The stock peaked at almost $18 in November 2008 when he was worth more than $8 million, and bottomed at $7.50 in February 2008 but has since improved.
Basil Tambanis: managing director of Melbourne-based gold explorer, Goldminex Resources, he has a shareholding of around 8.8 million. The stock peaked at almost $1.80 in August 2008 when he was worth more than $15 million, and bottomed at 75c in March 2009 but has since improved.
Barry Roberts-Thompson: the former Hutchison Communications CEO used to be worth more than $200 million but his shareholding is now down to about $7 million.
Nic Trimboli: director and founding shareholder of Fremantle-based Littleworld Beverages, he has a shareholding of around 4.6 million. The stock peaked at almost $1.75 in February 2007 when he was worth more than $7 million, and bottomed at $1.15 in December 2008 but has marginally improved.
John Walstab: director of Melbourne-based renewable energy product manufacturer Quantum Energy, has a shareholding of around 77 million. The stock peaked at almost 15c in December 2006 when he was worth more than $12 million, and bottomed at 3.5c in February 2008 but has since improved.
Paul Weightman: executive director and former chairman of Queensland-based property investment company, Cromwell Corp, he has a shareholding of around $12 million. The stock peaked at almost $1.30 in July 2007 when he was worth more than $15 million, and bottomed at 40c in February 2009 but has since improved.
Greg Wilkinson: deputy executive chairman of Sydney-based provider of financial and business management solutions, Reckon, he has a shareholding of around 7.2 million. The stock peaked at almost $1.60 in January 2008 when he was worth more than $10 million, and bottomed at 85c in October 2008 but has since improved.
Dan Wood: part of the exploration management team for the Melbourne-based Newcrest Mining, one of Australia's major gold-copper producers. He has a shareholding of around 240,000, which when peaked at almost $40 in March 2008, he was worth more than $9 million, but bottomed at $17 in October 2008.
Dat Sri Johann Young: group CEO of Sydney-based telecommunications products and services group, Entertainment Media &Telecoms Corp, he has a shareholding of around 32 million. The stock peaked at almost 50c in August 2008 when he was worth more than $16 million, and bottomed at 20c in March 2009 but is now improving.
Share trades and capital raising profits
With the margin loan still in place and paper losses exceeding $100,000, we have continued to lighten up the portfolio with more sales in the past month. Check out all the trades so far this year and here's the most recent disposals, which thankfully reveals profits of almost $10,000 this month courtesy of equity raising and share purchase plans involving Crown, Suncorp, Newcrest, Tabcorp and Commonwealth Office.
March 31
Crown: sold 1000 shares at $6.21
March 27
Chemgenex Pharmaceuticals: sold 516 at 51c
Emerging Leaders Investments: sold 500 at 53c
Mantra Resources: sold 157 at $1.85
March 26
Macquarie Winton Global Opportunities: sold 459 at $1.22
Clough Limited: sold 590 at 51c
Ivanhoe Australia: sold 343 at $1.01
March 24
Crescent Gold: sold 664 at 14c
Suncorp-Metway: sold 2,200 at $6.30
March 23
Newcrest Mining: sold 198 at $34.20
March 20
Adamus Resources: sold 663 at 38c
Crescent Gold: sold 1,192 at 14c
March 18
Adacel Technologies: sold 1,000 at 44c
March 17
Marathon Resources: sold 705 at 39c
March 16
Tabcorp Holdings: sold 820 at $6.24
Phosphagenics: sold 2,900 at 13c
Aberdeen Leaders: sold 312 at $1
March 13
Commonwealth Property Office Fund: sold 6,565 at 94c
Alchemia Limited: sold 1,613 at 21c
Brickworks Investment Company: sold 395 at 86c
From the press room
Journalist turned spindoctor Martin Summons came along to the Orica AGM in December and was very interested in the company's troubled relationship with its largest shareholder, Perpetual. It lead to this article in BRW last week - Crack the stock whip.
We've spent plenty of time re-arranging the press room so check it out here.
Government floats super regulator merger
Here's a corporate law newsflash from Henry Davis York partner James Lonie for tomorrow - April 1, 2009
The Government announced yesterday a plan to form a working committee to float the idea of a merger between APRA, the ACCC and ASIC to form a "super regulator".
The "Better Investment Outcomes" review will be wide ranging and include committee members from a broad group of stakeholders. In his release, the Minister for Financial Services was quoted as saying "all options are on the kitchen table and you could say we're not unagnostic as to which one will be adopted".
In a major policy shift, the Government's view was that there were lessons to be learnt from the credit crunch. Although Australia had so far weathered the GFC storm relatively well from a regulatory point of view, it should not be complacent, especially as the reason Australians had not been exposed too heavily to CDOs was because they didn't have any savings to invest. Also, the anti competitive four pillar policy had allowed our banks to flourish.
An alternative proposal to the merger could see ASIC becoming a listed entity (with the Commonwealth maintaining a 66% holding) and an expansion of its current "fee for service" funding model ala the ASX. Financial services industry participants supported the move away from a legalistic regulator role. "It doesn't always make business sense to slavishly follow the law. It would certainly boost flexible business outcomes if the regulator could bend the rules now and then" one unnamed broker said.
The Opposition was less enthusiastic. "The civilised world is going in one direction by privatising banking and the Government wants to swim upstream by floating ASIC. I might be mixing my metaphors but I know what you mean."
The Minister for Financial Services scoffed at the criticism of its reform agenda. "They're just jealous that they didn't think of it first. Can you imagine ASIC underwriting a float? I think it's an incredibly exciting prospect."
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.
First up this week, check out this comprehensive 1500-word piece written for Fairfax's www.businessday.com.au website yesterday which has laid down some important markers for the coming AGM mini-season.
It has been viewed more than 32,000 times and presumably quite a few of them are from within the Westfield, AMP and Rio Tinto camps given the predictions about embarrassing shareholder revolts that will unfold over the coming weeks.
Given that even Macquarie Group has today further modified its bonus system to reduce the cash component and increase the focus on longer term equity issues, it is hard to see how on earth Westfield founder and executive chairman Frank Lowy can continue to pocket more than $16 million a year in salary and incentive payments. Only Rupert Murdoch's $30 million annual whack is more outrageous.
You've also got to ask whether David Gonski is an appropriate ASX chairman when he sits on the Westfield remuneration committee which has just extended Lowy's contract for another 12 months. Talk about being out of touch with the community and political debate - let alone Westfield shareholders who have watched the share price halve over the past year.
The Fairfax business websites sure do drive strong traffic. This audio file of the battle with Frank Lowy over executive pay at last year's AGM has been downloaded more than 600 times over the past 24 hours. The exchange certainly does set the scene nicely for the showdown on May 6 in Sydney when the Westfield remuneration report will probably only be saved by the Lowy family voting their 8% stake in favour.
Rating the best and worst directors
The annual Risk Metrics corporate governance conference was another lively affair yesterday with the rankings of best non-executive directors as measured by total shareholder return featuring as the main display on the front of The Age's business section today.
Risk Metrics hasn't yet revealed the names of the directors who featured in the bottom quartile but these slides presented yesterday by research director Martin Lawrence show the huge difference between the best performed directors based on TSR for the 7 years to 2007, and those selected by Andrew Cornell for The AFR Magazine's so-called Dream Team board.
The Mayne Report's Dream Team of best directors is certainly very different again to those identified by Risk Metrics and The AFR.
Future Fund chairman David Murray was absolutely right yesterday when he said that the single most important thing institutional shareholders should focus on is the quality of directors that represent them on boards.
Whilst measuring TSR is interesting, there are so many carve-outs, qualifications and rogue statistics that you would be reluctant to base voting decisions exclusively on the data. Of course the likes of Elizabeth Nosworthy should be booted from all boards after three of her companies finished up in administration, but how do you identify poorly performing directors on companies that might be performing well under a strong management team?
I told the conference that the best way to assess director performance would be an anonymous survey of the top 200 directors each year which required them to nominate one board colleague they rated as doing a good job and one who is not contributing enough. Whenever I give a speech at a major conference, the participants fill in their feed-back form and then this is passed back, so why apply the same system to boards.
It's hard to go past peer review and this system would send institutional investors warning signals about directors that need to be moved on with a quiet tap on the shoulder counselling them to spend more time with the family.
It's time we had a really good debate on the performance of non-excecutive directors so let's hope Risk Metrics plucks up the courage to reveal the names of those at the bottom of the class whilst also recommending against a few more directors this coming AGM mini-season.
Oz Minerals board tilt - but will there be an AGM?
Just as Treasurer Wayne Swan was dropping his proverbial bomb by blocking the MinMetals bid for Oz Minerals last Friday, I was formally nominating for election to the board of the teetering miner. With Centro Retail not doing the right thing in recognising last year's mandate and putting me on their board, I'm back in the game looking for corporate governance turnaround situations. The proposed platform reads as follows:
Mr Mayne is standing for the Oz Minerals board as a catalyst for change. There needs to be more boardroom accountability for the company's precarious financial position and the decision last year to ignore an overwhelming shareholder vote and award an $8.3 million separation payment to former Oxiana Resources managing director Owen Hegarty.
There hasn't been a situation quite like this one before because the AGM date in late May still hasn't been revealed and the company could be in administration or taken over before shareholders get to pass judgment on the board. Today we've got news of another proposal from MinMetals to buy everything except Prominent Hill, Martabe and listed investments such as Toro Energy. The stock has been suspended yet again and we'll hopefully get more details tomorrow.
If the Oz Minerals AGM does proceed, former Zinifex and WA News chairman Peter Mansell would be wise not to seek another three year term. As chairman of the Oz Minerals remuneration committee he will go close to defeat given the simmering anger over the $8.4 million golden goodbye paid to former Oxiana Resources CEO Owen Hegarty last year. Besides, Mansell is the second busiest man in corporate Australia after Sir Rod Eddington and didn't win any many friends with the way he chaired WA News over the past few years before surrending meekly to Kerry Stokes.
Let's hope the prospect of major protests against the four Oz Minerals incumbents and an external candidate lobbing grenades doesn't spark any rash decisions that avoid the AGM showdown.
Cornwall cartoons for The Mayne Report
We're delighted to welcome seasoned cartoonist Mark Cornwall to The Mayne Report. Mark drew many hundreds of excellent toons for Crikey over the years before returning to teaching, but he's keen to get back into the game and we're delighted to have him.
Computershare drags the chain on electronic voting
Computershare CEO Stuart Crosby bravely fronted the Risk Metrics conference yesterday but he won't have enjoyed the experience which saw a range of participants rail against Australia's largely manual corporate voting system.
Indeed, if you read this corporate governance report released by AMP at yesterday's conference, it is not happy that 4% of all votes seem to routinely go missing thanks to the cumbersome manual processing system.
Asciano company secretary Fiona Mead also raised plenty of concerns about the system and everyone was left asking the question about why there hasn't been much movement to introduce a fully electronic voting system with a complete audit trail, given that an industry working party recommended precisely that a couple of years ago.
Crosby sheeted the blame home to some anachronistic laws and talked at length about all the problems with other systems around the world without ever really addressing the point that he's the world's biggest share registry provider who apparently doesn't want to open up the system and potentially jeopardise those fat profit margins.
This latest engagement with Computershare was largely triggered by this unflattering article in The AFR last year by Risk Metrics boss Dean Paatsch who likened vote processing in Australia to "a back office brothel". That led to this exchange at the Computershare AGM last November and then the appearance by Crosby yesterday.
Well done for fronting up, Stuart, but there needs to be a lot more movement at the station.
AMP's corporate voting report as David Murray dodges Centro conflict
AMP's Michael Anderson presented at yesterday's conference alongside Stuart Crosby and also released AMP's latest voting report, which is well worth a read. Given that AMP is voluntarily revealing its voting patterns with major ASX listed company - and voting against more than one third of all pay resolutions - it begs the question whether compulsory disclosure of institutional voting is the way to go.
After all, US mutuals have to reveal this sort of detail. Given that more than $1 trillion in superannuation money has been compulsorily confiscated from Australians and their employers, we do need more transparency around voting.
AMP is best of breed in the Australian market but it's time to move beyond a voluntary approach on disclosure. For instance, I'd really like to know how the Commonwealth Bank votes its 7% stake in Westfield on the remuneration report at the AGM next month. Under our current system, this will remain secret funds manager's business.
I asked David Murray yesterday about the conflicts surrounding banks getting into the funds management business yesterday and specificially mentioned the example of Centro where ComBank has more than $1 billion of loan exposures and had invested about $600 million of superannuation funds into Centro on the equity site. Surely debt and equity are in conflict when you get to work out situations.
Murray dodged the question, but did defend voting processes at CBA, saying that the board never interfered with the fund managers.
That's not the point. It's like saying Rupert Murdoch never tells his News Ltd editor not to criticise the company's operations. The Colonial fund manager who voted that key swing stake in favour of the BHP-Billiton merger back in 2001 knew that opposing the deal would have embarrassed then CBA chairman John Ralph, given that he was one of the BHP directors urging all shareholders to vote in favour.
Mayne Report video blog
This week we interviewed Dean Paatsch from Risk Metrics after the 2009 Risk Metrics Governance conference which covered everything from executive pay, to proxy voting, corporate governance, short selling and director performance. We also delved into the video archive and found an old appearance on the ABC's Difference of Opinion from September 20, 2007. Some of the predictions and summaries are quite prophetic considering the state of the financial world . An interesting watch.
The Mayne Report Rich List
Since we began compiling the Mayne Report Rich List documenting every Australian currently or previously worth more then $10 million, it has grown in numbers and popularity.
The Mayne Report Rich List was born on August 14, 2007 when it only had 345 names. We're now up to 1332 entries, although some are italicised, denoting that they are now longer worth more than our $10 million cut off.
Last Thursday BRW magazine released the Top 200 Executives Rich List, which was another excellent read. Comparable to the Mayne Report Rich List, we had 150 names already on our list, so here are latest entries courtesy of BRW:
Tony Alford: CEO and managing director of the Retail Food Group which owns the Donut King and Brumby's Bakeries franchises, he has a shareholding of around 22 million or 30%. The stock peaked at almost $2.10 in October 2007 when he was worth more than $40 million, and bottomed at 90c in December 2008 but is now improving.
Ian Ballis: purchased the former Ford chassis component plant in North Geelong for $7.1 million, which is a bargain considering the previous owners, Queensland-based City Pacific, paid around $18 million for the site in 2007.
Greg Bartlett: executive director of Westpac who owns about 840,000 shares. The stock peaked at almost $31 in December 2007 when he was worth more than $25 million, and bottomed at $15 in February 2009 but is now improving.
Steve Beardsall: managing director of Queensland-based coal seam gas exploration company Pure Energy Resources, he has a shareholding of around 3.6 million. The stock peaked at almost $9 in February 2009 when he was worth more than $40 million, but bottomed at 50c in April 2008.
Larry Benke: executive director of Worley Parsons whose shareholding is around 1.2 million. The stock peaked at almost $53 in December 2007 when he was worth more than $60 million, and bottomed at $11 in December 2008 but is now improving.
Graeme Blackman: chairman of Melbourne-based pharmaceutical company, IDT Australia, he has a shareholding of around 6 million. The stock peaked at almost $2.60 in December 2007 when he was worth more than $12 million, and bottomed at $1.50 in March 2009 but has since improved.
Maurice Brand: managing director of Perth-based Liquefied Natural Gas, he has a shareholding of around 11 million. The stock peaked at almost $1.25 in June 2008 when he was worth more than $12 million, and bottomed at 35c in December 2008 but has since improved.
Bill Bridges: Sydney-based real estate agent of Cassim Real Estate sold a prominent harbourside home in 2008 for a record of $45 million. He is selling the 100-year family home of the Fairfax famiy for an estimated $60 million and has made millions clipping the ticket on these big property deals for years.
Paul Bridgwood: director of Perth-based Liquefied Natural Gas, he has a shareholding of around 13 million. The stock peaked at almost $1.25 in June 2008 when he was worth more than $15 million, and bottomed at 35c in December 2008 but has since improved.
Andrew Buckley: managing director of Brisbane-based integrated professional services provider Cardno, he has shareholding of around 2.4 million. The stock peaked at almost $8 in December 2007 when he was worth more than $15 million, and bottomed at $2.60 in March 2009 but has marginally improved.
John Chan: managing director of the Perth-based property developer Finbar Group, who has a shareholding of nearly 19 million. The stock peaked at almost $1.05 in June 2006 when he was worth more than $18 million, and bottomed at 45c in December 2008 but has since improved.
Phillip Cronican: exceutive director of Westpac whose shareholding is around 608,000. The stock peaked at almost $31 in December 2007 when he was worth more than $17 million, and bottomed at $15 in February 2009 but is now improving.
Nicholas Davies: of Arrow Energy, one of Australia's leading producers of coal seam methane gas, has a shareholding of around 4.8 million. The stock peaked at almost $4 in June 2008 when he was worth more than $18 million, and bottomed at $1.80 in October 2008 but is now improving.
Geoffrey Davis: managing director of WA-based Medusa Mining, his shareholding is around 3.8 million. The stock peaked at almost $1.80 in March 2009 when he was worth more than $7 million, and bottomed at 4c in December 2008 but has since risen to a significant peak.
David Dix: executive chairman of AED Oil, he has a shareholding of around 48 million. The stock peaked at almost $11.50 in October 2007 when he was worth more than $500 million, and bottomed at 90c in March 2009 but is now marginally improving.
Bruce Dixon: the long-time Healthscope CEO owns shares worth $6.4 million.
Paul Fudge: a former rag trader who purchased a coal-seam gas plot earlier in the decade in Queensland. Coal-seam gas being the 'new gold', he is set to make millions by selling his CSG which is almost next to the Roma-to-Brisbane pipeline. Billions have been spent by the big companies buying up as much CSG as possible, so he stands to make a fortune.
Warren Gilmour: director of WA-based mining and materials company, Andean Resources, has a shareholding of around 11 million. The stock peaked at almost $2.30 in December 2007 when he was worth more than $22 million, and bottomed at 50c in December 2008 but is now improving.
Lim Kim Hai: executive chairman of the regional airline service, Rex Express, he has a shareholding of around 25 million or 20% of the company. The stock peaked at almost $2.80 in October 2007 when he was worth more than $60 million, and bottomed at 85c in March 2009 but is improving.
Daryl Holmes: director of Queensland-based administration and management systems company, 1300 smiles, has a shareholding of around 15 million shares or 75% of the company. The stock peaked at almost $3.40 in July 2007 when he was worth more than $80 million, and bottomed at $2.20 in November 2008 but has since improved.
John Houston: chairman of Sydney-based telecommunications products and services group, Entertainment Media &Telecoms Corp, he has a shareholding of around 61 million. The stock peaked at almost 50c in August 2008 when he was worth more than $30 million, and bottomed at 20c in March 2009 but is now improving.
Silviu Itescue: director and chief scientific advisor for biotechnology group, Mesoblast, he has shareholding of around 37 million or nearly 35%. The stock peaked at almost $2.50 in February 2007 when he was worth more than $70 million, but bottomed at 50c in April 2008.
Gail Kelly: CEO of Westpac whose shareholding is around 1.5 million. The stock peaked at almost $31 in December 2007 when she was worth more than $45 million, and bottomed at $15 in February 2009 but is now improving.
Reg Kermode: chairman of Sydney-based Cabcharge Australia, he has a shareholding of around 1.1 million. The stock peaked at almost $14 in June 2007 when he was worth more than $14 million, and bottomed at $5.20 in February 2009 but has since improved.
Ross Lane: director of the Sydney-based fashion brand management company, Oroton Group, he has a shareholding of around 9.5 million. The stock peaked at almost $4.50 in November 2007 when he was worth more than $50 million, and bottomed at $2 in February 2009 but is now improving.
Peter Marriott: the long-time ANZ executive owns shares worth about $8 million.
Don Meij: managing director of the Domino's Pizza Enterprise, he has a shareholding of around 3.5 million. The stock peaked at almost $4.20 in June 2006 when he was worth more than $12 million, and bottomed at $2.50 in December 2008 but has since improved.
Lev Mizikovsky: chairman of Queensland-based construction company Tamawood, he has a shareholding of around 22 million. The stock peaked at almost $3.30 in October 2007 when he was worth more than $65 million, and bottomed at $1.50 in February 2009 but has since improved.
Paul Naude: from humble beginnings as a small board shorts manufacturer on the Gold Coast, Billabong International is now a global surf and streetwear conglomerate. Paul is a director with a shareholding of around 1.4 million shares. The stock peaked at almost $18.50 in July 2007 when he was worth more than $25 million, and bottomed at $6.50 in February 2009 but is now marginally improving.
Nigel Nixon: executive director of the Retail Food Group which owns the Donut King and Brumby's Bakeries franchises, he has a shareholding of around 5 million. The stock peaked at almost $2.10 in October 2007 when he was worth more than $10 million, and bottomed at 90c in December 2008 but is now improving.
Rod Pearse: the veteran Boral CEO has a shareholding worth more than $10 million, even after recent weakness courtesy of profit warnings.
Geoff Pigot: a non-executive director of Queensland coal miner Aquila Resources who owns 13 million shares. The stock peaked at almost $17 when he was worth more than $200 million, but is now down to just $3, valuing the stake at about $40 million.
Clive Rabie: group CEO of Sydney-based provider of financial and business management solutions, Reckon, he has a shareholding of around 10 million. The stock peaked at almost $1.60 in January 2008 when he was worth more than $15 million, and bottomed at 85c in October 2008 but has since improved.
Andrew Reitzer: the South African expat and long-time Metcash CEO owns shares worth about $7 million.
Harry Rosen: CEO of Melbourne-based pharmaceutical company, Phosphagenics, he has a shareholding worth about $55 million. The stock peaked at almost 45c in September 2006 when he was worth more than $20 million, and bottomed at 6c in November 2008 but has only marginally improved.
John Schaffer: chairman and manging director of the Perth-based leather and building products company Schaffer Corp, has a shareholding of around 3 million. The stock peaked at almost $9.50 in February 2008 when he was worth more than $25 million, and bottomed at $4 in February 2009 but is now improving.
Ines Scotland: CEO of the Sydney-based Citadel Resource Group, she has a shareholding of around 255 million. The stock peaked at almost 39c in August 2008 when she was worth more than $100 million, and bottomed at 11c in November 2008 but has since improved.
Phillip Sidney: managing director of Melbourne-based renewable energy product manufacturer Quantum Energy, has a shareholding of around 683 million. The stock peaked at almost 15c in December 2006 when he was worth more than $65 million, and bottomed at 3.5c in February 2008 but has since improved.
Wayne Sidwell: exceutive chairman and CEO of the Melbourne-based specialty printing services, Wellcom Group, has a shareholding of around 25 million. The stock peaked at almost $3.20 in June 2007 when he was worth more than $80 million, and bottomed at $1.50 in February 2009 but has since improved.
Mark Smith: owns about $6.5 million worth of Karoon Gas shares.
Kong Chong Soon: chairman of the WA-based property development company United Overseas Australia who has a shareholding of around 195 million or 5.9%. The stock peaked at almost 36c in January 2008 when he was worth more than $65 million, and bottomed at 9c in January 2009 but has since improved.
Charles Stinger: owns about $11.3 million worth of shares in Probiotic.
Andrew Stock: significant shareholder in Origin Energy, with around 463,00 shares. The stock peaked at almost $18 in November 2008 when he was worth more than $8 million, and bottomed at $7.50 in February 2008 but has since improved.
Basil Tambanis: managing director of Melbourne-based gold explorer, Goldminex Resources, he has a shareholding of around 8.8 million. The stock peaked at almost $1.80 in August 2008 when he was worth more than $15 million, and bottomed at 75c in March 2009 but has since improved.
Barry Roberts-Thompson: the former Hutchison Communications CEO used to be worth more than $200 million but his shareholding is now down to about $7 million.
Nic Trimboli: director and founding shareholder of Fremantle-based Littleworld Beverages, he has a shareholding of around 4.6 million. The stock peaked at almost $1.75 in February 2007 when he was worth more than $7 million, and bottomed at $1.15 in December 2008 but has marginally improved.
John Walstab: director of Melbourne-based renewable energy product manufacturer Quantum Energy, has a shareholding of around 77 million. The stock peaked at almost 15c in December 2006 when he was worth more than $12 million, and bottomed at 3.5c in February 2008 but has since improved.
Paul Weightman: executive director and former chairman of Queensland-based property investment company, Cromwell Corp, he has a shareholding of around $12 million. The stock peaked at almost $1.30 in July 2007 when he was worth more than $15 million, and bottomed at 40c in February 2009 but has since improved.
Greg Wilkinson: deputy executive chairman of Sydney-based provider of financial and business management solutions, Reckon, he has a shareholding of around 7.2 million. The stock peaked at almost $1.60 in January 2008 when he was worth more than $10 million, and bottomed at 85c in October 2008 but has since improved.
Dan Wood: part of the exploration management team for the Melbourne-based Newcrest Mining, one of Australia's major gold-copper producers. He has a shareholding of around 240,000, which when peaked at almost $40 in March 2008, he was worth more than $9 million, but bottomed at $17 in October 2008.
Dat Sri Johann Young: group CEO of Sydney-based telecommunications products and services group, Entertainment Media &Telecoms Corp, he has a shareholding of around 32 million. The stock peaked at almost 50c in August 2008 when he was worth more than $16 million, and bottomed at 20c in March 2009 but is now improving.
Share trades and capital raising profits
With the margin loan still in place and paper losses exceeding $100,000, we have continued to lighten up the portfolio with more sales in the past month. Check out all the trades so far this year and here's the most recent disposals, which thankfully reveals profits of almost $10,000 this month courtesy of equity raising and share purchase plans involving Crown, Suncorp, Newcrest, Tabcorp and Commonwealth Office.
March 31
Crown: sold 1000 shares at $6.21
March 27
Chemgenex Pharmaceuticals: sold 516 at 51c
Emerging Leaders Investments: sold 500 at 53c
Mantra Resources: sold 157 at $1.85
March 26
Macquarie Winton Global Opportunities: sold 459 at $1.22
Clough Limited: sold 590 at 51c
Ivanhoe Australia: sold 343 at $1.01
March 24
Crescent Gold: sold 664 at 14c
Suncorp-Metway: sold 2,200 at $6.30
March 23
Newcrest Mining: sold 198 at $34.20
March 20
Adamus Resources: sold 663 at 38c
Crescent Gold: sold 1,192 at 14c
March 18
Adacel Technologies: sold 1,000 at 44c
March 17
Marathon Resources: sold 705 at 39c
March 16
Tabcorp Holdings: sold 820 at $6.24
Phosphagenics: sold 2,900 at 13c
Aberdeen Leaders: sold 312 at $1
March 13
Commonwealth Property Office Fund: sold 6,565 at 94c
Alchemia Limited: sold 1,613 at 21c
Brickworks Investment Company: sold 395 at 86c
From the press room
Journalist turned spindoctor Martin Summons came along to the Orica AGM in December and was very interested in the company's troubled relationship with its largest shareholder, Perpetual. It lead to this article in BRW last week - Crack the stock whip.
We've spent plenty of time re-arranging the press room so check it out here.
Government floats super regulator merger
Here's a corporate law newsflash from Henry Davis York partner James Lonie for tomorrow - April 1, 2009
The Government announced yesterday a plan to form a working committee to float the idea of a merger between APRA, the ACCC and ASIC to form a "super regulator".
The "Better Investment Outcomes" review will be wide ranging and include committee members from a broad group of stakeholders. In his release, the Minister for Financial Services was quoted as saying "all options are on the kitchen table and you could say we're not unagnostic as to which one will be adopted".
In a major policy shift, the Government's view was that there were lessons to be learnt from the credit crunch. Although Australia had so far weathered the GFC storm relatively well from a regulatory point of view, it should not be complacent, especially as the reason Australians had not been exposed too heavily to CDOs was because they didn't have any savings to invest. Also, the anti competitive four pillar policy had allowed our banks to flourish.
An alternative proposal to the merger could see ASIC becoming a listed entity (with the Commonwealth maintaining a 66% holding) and an expansion of its current "fee for service" funding model ala the ASX. Financial services industry participants supported the move away from a legalistic regulator role. "It doesn't always make business sense to slavishly follow the law. It would certainly boost flexible business outcomes if the regulator could bend the rules now and then" one unnamed broker said.
The Opposition was less enthusiastic. "The civilised world is going in one direction by privatising banking and the Government wants to swim upstream by floating ASIC. I might be mixing my metaphors but I know what you mean."
The Minister for Financial Services scoffed at the criticism of its reform agenda. "They're just jealous that they didn't think of it first. Can you imagine ASIC underwriting a float? I think it's an incredibly exciting prospect."
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.