Contact Energy seeks $500,000 increase in director pay plan

Contact Energy directors are seeking shareholders' approval for a $500,000 leap in their combined pay in a deal comprising shares and cash, the Dominion Post reported today.

Directors' proposals for a pool of $770,000 will be voted on at the annual meeting in Dunedin on February 17.

Two years ago, shareholders approved a $47,000 increase in the fees pool for directors to $270,000.

It is yet to be seen whether the Shareholders Association's endorsement of the new pay deal will persuade the company's 104,000 shareholders, mostly mums and dads, to approve it without protest.

Three of the past four annual meetings have been stormy, with shareholders balking at $6.5 million of payments to former chief executive Paul Anthony, directors' pay increases and retirement allowances.

However, 51.2 per cent shareholder Edison Mission Energy has the voting muscle to push through the deal.

The New Zealand Exchange's market surveillance committee has granted Contact a waiver from a listing rule, allowing Edison to vote for the deal.

The pay arrangement has three parts:

* A $770,000 fees pool for directors.

* Abolition of retirement payments for directors.

* Payment of Contact shares worth $294,000 to three long-serving directors as compensation for abolishing retirement allowances.

The pay hike not only compensates directors for losing retirement allowances in the future, but also tackles underpayment of directors, the company says in a notice to shareholders.

It also accommodates two extra directors, who were appointed last October, at the higher payment rates.

Only a handful of companies have abolished retirement payments and directors in those companies have sought and got increased fees as compensation.

Contact's proposal is novel in that part of the increase in fees is to be paid in Contact shares.

The company will buy the shares on the market and they will be held in trust for three years or until the director leaves, whichever comes first.

Under the deal, chairman Phil Pryke's pay will more than double to $180,000, from $80,000.

His remuneration will include $60,000 in restricted shares.

Directors' fees will double to $90,000, including $60,000 in restricted shares.

The three directors affiliated to Edison are not allowed under their employment contracts to accept the fees, which are donated to charity in New Zealand, the newspaper reported.

While the approved directors' fees pool is $270,000, shared by five directors, Contact appointed two new directors last October, Patrick Strange, an independent director, and Tom McDaniel, the chief executive of Edison Mission Energy.

Under Contact's constitution, the company was allowed to increase the pool to $365,000 to cover the new directors.

The Shareholders Association likes the payment of shares to directors because it lines up the interests of directors in seeing the share price rise with the interests of shareholders.

The association agrees Contact's directors are underpaid compared to similar companies in New Zealand and Australia.

It says in a letter to shareholders "the fact that Contact directors have (in NZSA's view) historically been relatively underpaid, whereas the company had relatively overperformed, makes the proposal even easier to accept."

- NZPA