KEY POINTS:
Why is Hanover chairman Greg Muir absent from the public fray as investor fears grow over the fate of New Zealand's third largest finance company?
What investors should be demanding is a clear statement from Muir that he - as one of the two independent directors still publicly
listed on the Hanover Finance board - is looking out for their interests as he negotiates hard with the two Hanover key shareholders, Rich Listers Eric Watson and Mark Hotchin, to ensure they pump in enough capital so the proposed restructuring can be completed.
If sufficient capital cannot be injected, or its loans book deteriorates savagely, the company will be destined for receivership like many less industrious finance companies.
Muir - also executive chairman of Pumpkin Patch - is one of our most prominent businessmen.
He's had his fingers into many commercial pies, is ambitious for New Zealand's future and serves on a number of semi-public entities.
He's also been honoured in the prestigious Deloitte/Management Top 200 awards.
But when Hanover Finance made its announcement on Wednesday that the board would suspend acceptance of new investment and repayment of existing deposits as it worked with trustees on a plan to restructure the business "going forward", the independent chairman's name was not mentioned in the press statement.
Hanover Finance's statement focused on an assurance the company continued to meet its trust deed obligations and a further assurance it had "ongoing financial capacity to trade".
The company said it was acting early to preserve value in the business as market conditions continued to deteriorate and uncertainty mounted over borrowers' abilities to repay.
The remainder of the statement was attributed to major shareholder Hotchin who - among other explanatory remarks - said he and fellow shareholder Watson had pledged continued support for the business and would also work closely with the trustees to deliver the restructure arrangement.
News reports focused on calls for legal action to be taken against directors of Hanover Finance, "two of New Zealand's richest men".
The Commerce Commission is investigating whether the company's promotional and advertising material misled investors. The Securities Commission will also probe statements in its prospectus.
There's an important element to why Muir should be fronting.
When he was appointed chairman in December 2005, Hotchin paid tribute to his "first-class public reputation" and his "close alignment with investor interests", an attribute which investors would appreciate.
"His appointment significantly strengthens our governance structure," said Hotchin.
Hanover had earlier attracted criticism due to its lack of independent directors and a perception it was merely the creature of its major shareholders.
Getting Muir on board carried considerable cachet. "Based on the NZX listing rule requirement of at least two independent directors for boards of our size, we are moving to a higher standard and in doing so have raised the governance bar for New Zealand finance companies," said Hotchin.
Muir's role was described as an active one. It was to include involvement in group strategy, offshore expansion and key relationships with each CEO of the various Hanover companies who reported to him.
Problem is one key CEO lasted little more than six months before moving on. The company has also attracted controversy over the extent of inter-company loans.
But the presence of Muir as chairman helped retain confidence.
A search of the Companies Register on Friday showed Muir and fellow independent director Sir Tipene O'Regan are still listed as Hanover Finance directors.
Muir is also listed as a director of Hanover Group, Hanover Capital, Hanover Funds Management and Hanover Financial Services. Hotchin and Bruce Gordan are also executive directors.
They are thus not independent. Hotchin is also a shareholder.
Just 10 weeks ago, Muir announced Hanover Finance had confirmed a solid performance with an audited profit before tax of $17.2 million for the half-year to December 31, 2007.
He said Hanover Finance was well-placed to meet market demand with strong liquidity, judicious management and shareholder equity well above trust deed levels.
The investors would have had more confidence if last week's Hanover Finance statement had also been issued under Muir's name as chairman, which is the standard commercial norm.
Investors are now concerned Hotchin and Watson paid themselves a $41 million dividend for the 2007 financial year.
Muir should be answering investors' questions on these and other issues.
When financial institutions are headed toward the rocks the interests of investors and shareholders are not necessarily aligned. That's the purpose of appointing an independent chairman in the first place.
