The public humiliation of former ANZ Bank New Zealand CEO David Hisco hasn't been fully endorsed by the top end of Auckland.
Members of this group see Hisco as a very important individual who had huge responsibilities and goals to achieve.
After all, no other New Zealand chief executive has delivered an annual profit of $1.953 billion and had to worry whether it might only be $1.925b.
Indeed, the former ANZ chief executive may have had many sleepless nights worrying how to deliver a $2b plus profit for the September 2019 year. Would he have to ping every ANZ client account with an additional $1 monthly fee or introduce some other client charges to pass the magic $2b profit figure?
How can we possibly criticise a CEO who achieved such massive profit figures when the three largest listed NZX companies, Meridian Energy, Auckland International Airport and a2 Milk, reported combined net earnings of only $660m for the same period?
What are a few personal expenses charged to the company when the CEO delivered a gigantic ordinary dividend of $4.6b to his Australian parent company in the 2018 calendar year?
In the past five financial years, all under Hisco's stewardship, ANZ Bank has paid total dividends of $11.719b to its Australian parent.
From this perspective Hisco should be lauded – at least across the Tasman – for extracting so much cash out of the NZ economy instead of being humiliated for a few personal expenses.
Hisco has also had two other major concerns, the Reserve Bank's reprimand of ANZ for its flawed internal capital requirement model and Governor Adrian Orr's proposal to raise bank capital requirements.
The latter is a major worry for the highly paid CEOs of Australian owned banks because it could mean their lucrative dividend payments across the Tasman will have to be curtailed, at least in the short term.
Australians have given their company bosses far more leniency, which is consistent with Hisco's claim that he had verbal authority from "executives in Australia" to charge his wine storage expenses and personal use of chauffeurs to the company.
The Qantas Chairman's Lounge, which has a secret invitation only membership model, is an example of these special privileges.
There are six of these private, unmarked lounges in Sydney, Melbourne, Brisbane, Canberra, Adelaide and Perth airports. There is where Government ministers and large company bosses can get away from crowded business lounges, discuss big deals, lobby ministers or have a top restaurant quality meal.
Maybe, the new Air New Zealand CEO, who will replace Chris Luxon, will establish a Chairman's Lounge for New Zealand's top end where invited members can avoid the madding crowd and media scrutiny.
However, it is sobering to note that many former Qantas Chairman Lounge members lost their privileged positions in executive purges following the release of the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry report.
Hisco is another victim of the Royal Commission, which has demanded higher ethical standards and transparency from Australian banks.
Unfortunately, executive excess is not only self-initiated, it is also endorsed by directors. This is illustrated by the recent release of the scheme booklet for the proposed takeover of Westland Co-operative Dairy Company Limited by Mongolia based Yili Industrial Group.
Yili, which is listed on the Shanghai Stock Exchange, is China's largest dairy producer with an estimated 22 per cent market share in its home country. Yili purchased Timaru based Oceania Dairy in 2013.
Section 6.9 of Westland's scheme booklet contained the short statement that "no agreement or arrangement has been made, or is proposed to be made between Westland or any related party of Westland or any director, senior manager or their associates of Westland or its related companies, under which a payment or other benefit may be made or given by way of compensation for loss of office, or as to their remaining in or retiring from office in connection with, in anticipation of, or in response to, the scheme".
This was quickly replaced by a new section 6.9, which is totally different to the original section 6.9.
The new section 6.9 revealed that six company executives would receive total cash bonuses of $1,648,000 if the Yili bid is successful. The first 15 per cent will be paid upon entry into the implementation of the transaction, a further 60 per cent paid upon the actual implementation of the transaction and the remaining 25 per cent six months after the deal is completed.
Westland CEO Toni Brendish, who was paid over $1m last year, will receive $680,000 of the $1,648,000 cash bonus.
Directors believe that these executives undertook a significant amount of work over a 12 month plus period in relation to the Yili offer. This included the initial capital review of Westland, investigating future capital and ownership options for Westland, looking for a cornerstone shareholder and assisting the competitive bidding process.
However, many Westland shareholders are appalled by these cash bonuses because this management team has contributed to Westland's poor performance and there is now a strong incentive for management to aggressively support the Yili offer, instead of looking for a way to keep Westland under New Zealand control.
Most of the tasks outlined by directors, particularly a capital review of Westland, look like normal senior executive tasks, and the co-ops cash bonuses are well in excess, in dollar terms, of Hisco's transgressions.
In addition, the scheme document disclosed total consultancy costs and abnormal administration expenses of $8.8m. This probably includes the proposed $1.6m cash bonus to management and an additional $7.2m for legal and investment banking services.
These expenses are huge, particularly in relation to the assessed value of the co-op.
Grant Samuel has valued Westland's equity in the range of $63.3m to $99.7m, compared with Yili's $246m offer.
The independent adviser concluded: "Since its decision not to join Fonterra in 2001, Westland has been an independent dairy co-operative. Following the introduction of Dairy Industry Restructuring Act 2001 (DIRA), Westland farmers regularly enjoyed payouts equivalent to or slightly higher than Fonterra, validating in part the independent decision.
"Since the 2015/16 season Westland has not been paying a market price for milk due to a combination of factors but primarily because the processing operations had become less competitive, overheads had risen and new investments were not contributions to the extent expected."
Grant Samuel could have added that Westland had far too much debt.
The scheme booklet also notes; "The scheme of arrangement between Yili and Westland provides a typical exclusivity framework in favour of Yili such that Westland has agreed to 'no shop, no talk, no due diligence' restrictions subject to certain exceptions".
If these exceptions are triggered, and there is successful bid from another party, Westland will have to pay Yili $5.88m.
The Chinese land grab for our dairy industry is reminiscent of Australia's land grab of our banking sector in the 1980s and 1990s. Just over three decades ago, ASB Bank and Bank of New Zealand were 100 per cent New Zealand owned and ANZ Bank New Zealand was 25 per cent NZ owned but they are now all 100 per cent Australian owned.
These three banks are now hugely profitable and had total ordinary dividends of $6.975b in the 2018 fiscal year.
The other lesson from the Westland saga is the massive value gap between a poorly performing co-op and what a buyer - who will turn the co-op into a traditional corporate entity - is prepared to pay. Fonterra shareholders should take note of this as Yili is offering $246m for Westland while Grant Samuel values the poorly performing, highly indebted co-op between $63.3m to $99.7m.
Westland shareholders will meet in Greymouth on July 4 to approve the transaction.
Disclosure of interests: Brian Gaynor is a director of Milford Asset Management.