Brian Gaynor: Absence makes the board grow richer

The heat was on GPG's directors at last week's annual meeting but they managed to save their lucrative options scheme by voting 22 million discretionary votes in their favour.

The directors are extremely fortunate that the meeting was held in London: if it had been held in New Zealand, where most of the company's shareholders are domiciled, the controversial discretionary vote decision would have received considerable public attention.

Six directors and just 19 additional shareholders, out of a total 27,900, attended GPG's 35-minute meeting.

Sir Ron Brierley opened the formal proceedings by announcing the launch of the company's website, www.gpgplc.com. He made no comments on the company's activities for the year so far but invited questions from the floor. None was forthcoming.

Resolution 2 (directors' remuneration), resolution 7 (the issue of up to 22.9 million options to directors) and resolution 15 (proposed capital notes issue in New Zealand) received the most attention.

A London lawyer representing Wellington shareholder John Tizard raised several points regarding options. He said he was not against adequate remuneration but the options issues were being approved by directors who were the main beneficiaries of the scheme.

He said GPG was trading at a discount to net asset value, which reflected an unsatisfactory corporate governance structure and inadequate shareholder control. Its directors were also paid far more than their peers in Australia and New Zealand.

He added that future meetings should be held in New Zealand as there was no impediment in law.

Brierley rejected Tizard's views on options. He argued that they were an effective method of remuneration within a total package and he and the rest of the board believed that share options and the level of remuneration were appropriate for GPG.

The options motion was passed by 95.3 million votes to 74.4 million, but it would have been lost if the directors had not voted 22 million discretionary votes in their favour.

The voting of the discretionary proxies is extremely controversial. GPG's directors not only determine their own lucrative options scheme (the remuneration committee is dominated by executive directors) but they also voted discretionary shares in support of resolutions that benefited them personally.

The other important item on the agenda was the proposed capital notes issue. Brierley said that the cash was not earmarked for any specific activity but would boost general funds.



He indicated that the capital note issue would raise in the region of $200 million and the interest rate was likely to be in the 8.5 per cent to 9 per cent range.

Capital Properties Capital Properties' one for three pro-rata rights issue at 75c has raised a few eyebrows among its 17,500 shareholders.

The issue, which will raise $44 million, follows a $31.4 million pro-rata issue less than 12 months ago.

Last year's issue was on a one for three basis at 72c. Chairman Colin Beyer, the former chairman of Tower, wrote at the time: "While the proceeds of the issue will not be applied to any specific contracted property purchase, the proceeds will provide Capital Properties with greater flexibility to acquire additional good quality commercial properties."

Forsyth Barr underwrote the issue for $313,986 and the proceeds were used to repay debt.

Beyer says the latest issue will "not be applied to a specific, contracted property purchase, but could be used to further strengthen the balance sheet and coverage ratios. This would also provide the company with greater financial flexibility to acquire or develop additional good quality buildings and refinance its maturing April 15, 2005, capital notes."

Forsyth Barr will also underwrite the latest issue, this time for $440,614. It has been the organising broker for both issues and large sections of the latest investment statement are exactly the same as last year's document.

What are Beyer and his fellow directors up to? Why are they raising money now to refinance capital notes that will mature in April 2005?

These capital raisings are dilutionary and have a negative impact on Capital Properties' dividend rate. Its gross dividend has fallen from 11.65c a share in the March 2001 year to 9.8c in the 2002 year and 9.13c in the latest period. Following the latest rights issue, the directors expect to be able to maintain a gross dividend of at least 9c a share. Unfortunately, shareholders are not being given the opportunity to question Beyer before the rights issue closes on July 11 because the company's annual meeting will not be held until July 18.

Certified Organics Who is New Zealand's highest paid managing director? Is it Theresa Gattung of Telecom, Peter Springford (Carter Holt) or Stephen Barrett (Contact Energy)?

They are all well paid, but it would be hard to beat Earl Stevens of Certified Organics in terms of relative pay.

Stevens was paid $259,000 last year compared with the company's total revenue of just $741,000. In other words, his remuneration accounted for 35 per cent of Certified Organics' turnover and was equal to 8.3 per cent of its sharemarket capitalisation.

Total remuneration of the five directors was $682,000, or 92 per cent of the company's turnover. In addition, Stevens sold 250,000 shares for $142,600 or an average of 57c compared with yesterday's closing price of 6.5c (these figures have been adjusted for a 1 for 100 share consolidation last August).

Certified Organics was back-door listed through AQL in mid-2001. At the time it was forecasting sales of $9.8 million for the December 2002 year and $24.8 million for the current year. Directors are still fairly confident, although they have cut this year's sales forecast to the $1.25 million to $2 million range.

The company will have to generate higher revenue than that in light of Stevens' salary and the total remuneration paid to directors.

Certified Organics holds its annual meeting in Auckland on Friday.

Air New Zealand The Controller and Auditor-General's comments on Air New Zealand, which is 82 per cent owned by the Crown, are disturbing.

As part of his 132-page report "Central Government: Results of the 2001-02 Audits" the Auditor-General wrote that Air New Zealand was a unique organisation because it was controlled by, and its accounts were consolidated by, the Crown, yet it was not accountable to Parliament.

He wrote: "The Auditor-General is the auditor of Air New Zealand under the Public Audit Act 2001, because it is a public entity under the act as a result of the Crown's controlling interest.

"Thus, the Auditor-General can report to Parliament any matter of his choosing arising from the exercise of his functions, duties and power as auditors."

Finance Minister Dr Michael Cullen has shown no inclination to put any political pressure on Air New Zealand but the Auditor-General's comments are a loud warning.

It would be relatively easy for Parliament to have a big influence over Air New Zealand, particularly if an interventionist economic philosophy became more popular.

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