Why do some companies pay large director fees while others are penny pinchers? This is a question many shareholders have been asking as they receive a flood of annual reports in recent weeks.
The list below shows the fees paid to chairmen of New Zealand-based NZSE-40 index companies. The average chairman's
fee for the 29 companies is $91,500, but only seven received more. (Nine of the NZSE-40 companies are overseas-based and two, AMP Office Trust and Kiwi Income Trust, are not limited liability companies.)
As Telecom represents 22 per cent of the index and is three times more valuable than the next-largest company, it is not surprising that its chairman is paid far more than anyone else. But the fees paid to some chairmen are out of line with the market average and their company's size.
These include Michael Andrews at Rubicon, Phil Pryke (Contact Energy), Keith Smith (The Warehouse) and Douglas Goodfellow (Sanford).
Rubicon is the fifth-smallest NZSE-40 company, ahead of only Tranz Rail, Property for Industry, Nuplex and Hallenstein Glasson, yet Michael Andrews ranks behind Roderick Deane as the highest-paid chairman.
Andrews has had a great run in recent years. His total remuneration from Fletcher Challenge, Fletcher Building and Rubicon in the June 2001 year was $3,298,553.
The $170,000 he receives from Rubicon will be used to exercise options at 63.7c per ordinary share. As these options are already in the money to the tune of $22,000, it could be argued that Rubicon paid Andrews $192,000.
It is difficult to understand how Andrews justifies this payment. On the basis of his $170,000, and the relative market size of Rubicon and Telecom, Deane should be paid $7.5 million as chairman of our largest listed company.
At the other end of the scale to Andrews are Pryke, Smith and Goodfellow. The Warehouse and Contact Energy are the third and fourth-largest listed companies, yet their chairmen's fees are relatively low. Pryke has tried several times to raise directors' fees but Contact Energy's shareholders have vigorously opposed the move.
Smith is a huge bargain as far as The Warehouse is concerned, but that is about to change. Shareholders are being asked at the discount retailer's annual meeting on November 29 to approve an increase in directors' fees from $315,000 to $489,000. There should be little resistance to this move.
Sanford's shareholders get the best value for money. Douglas Goodfellow receives only $25,000 a year, yet the fishing company is ranked, in terms of market value, near the middle of the NZSE-40 companies.
AUCKLAND INTERNATIONAL AIRPORT
Waitakere City mayor Bob Harvey has set the cat among the pigeons as far as Auckland City's selldown of its 25.6 per cent stake in Auckland International Airport (AIA) is concerned.
His suggestion that the Whenuapai Aerodrome be turned into a commercial airport indicates that the Mangere airport may face serious competition in the Auckland region. At this stage Harvey doesn't want AIA involved in the project.
Whenuapai was Auckland's commercial airport until the establishment of Mangere Airport. The Air Force now operates the airfield in northwest Auckland but is moving out.
Harvey has set up a taskforce to coordinate his ambition to re-establish Whenuapai as a commercial airport.
The project makes good business sense. In Europe Ryanair and other discount airlines use smaller airports.
Why couldn't Virgin Blue and Air New Zealand Express fly into the North-West Airport?
Harvey's biggest problem may be that Whenuapai will become too popular as a commercial operation.
Stansted Airport, which Ryanair uses to serve London, has become so successful that local residents have formed huge protest groups to oppose its constant expansion.
NUPLEX
Nuplex's annual meeting was far more optimistic than 12 months ago.
Last year directors were subjected to a barrage of questions over the company's disastrous investment in Medihold in Australia.
Medihold was bought for $27.2 million, including $21.2 million of goodwill, in January last year and $11.9 million of this had to be written off less than six months later.
Its foray into Australia had a huge impact on profitability and the synthetic resins and chemical company reported net earnings of only $1.3 million for the June 2001 year compared with $16.7 million in the previous year. Chairman Fred Holland was given a hard time by shareholders and he could have lost his board seat if the Shareholders Association had not withdrawn a motion to put all resolutions to a poll.
Holland was in a much happier mood on Friday after a net earnings recovery to $12.6 million for the June 2002 year. This was after a further $5.6 million writeoff associated with the Medihold purchase.
Nuplex has completed the acquisition of Asia Pacific Specialty Chemicals in Australia for $84 million since balance date and Holland told shareholders that the new acquisition was "bedding in well and operating to expectations".
He said that the net surplus for the first quarter, including Asia Pacific Specialty Chemicals, was 50 per cent ahead of the same period last year but this trend would not be maintained over the balance of the year because of rising raw material prices.
Holland believes that Nuplex will achieve net profit growth before abnormal items of at least 10 per cent for the June 2003 year. This indicates a net profit of at least $21 million or 35c a share.
At yesterday's closing price of $3.26 a share the company has a 2003 year prospective June 2003 year price/earnings ratio of 9 and a historic dividend yield of 5.2 per cent fully imputed.
Nuplex is attractive at current levels as long as it doesn't experience the same problems with its new Australian acquisition as it did with Medihold.
NEW YORK MARATHON
As reported last week, NZ Stock Exchange relations manager Geoff Brown was running in the New York Marathon for child cancer. He started at the back of the field and sponsors agreed to donate 1c for every runner he passed.
The good news for child cancer is that Brown finished in 2126th place in a highly respectable time of 3h, 23m and 31s.
As 31,824 individuals finished the marathon, this indicates that Brown passed 29,698 finishers and each sponsor will be asked to contribute $296.98 to the cause.
Brown started at the back of the field and passed more than 93 per cent of runners.
His next major challenge is to help take the New Zealand Stock Exchange from the back of the pack to the top half of the field.
* bgaynor@xtra.co.nz
Chairmen's fees: who gets what
Telecom Roderick Deane $382,000
Fletcher Building Roderick Deane $180,000
Rubicon Michael Andrews $170,000
Fletcher Forests Sir Dryden Spring $125,000
Tower Colin Beyer $111,900
Carter Holt Sir Wilson Whineray $100,000*
Sky City Jon Hartley $100,000
Air New Zealand John Palmer $90,000*
UnitedNetworks Bob Green $87,500
TrustPower Harold Titter $85,000
Waste Management Alton Jamieson $81,000
Auckland Airport Wayne Boyd $80,000
INL Ken Cowley $80,000
Nuplex Fred Holland $80,000
Tranz Rail Robert Wheeler $80,000
Infratil Kevin OConnor $75,000
F&P Appliances Gary Paykel $71,000*
F&P Healthcare Sir Colin Maiden $70,000*
Briscoe Rosanne Meo $70,000
Contact Energy Phil Pryke $68,900
Port of Tauranga Fraser McKenzie $68,300
Natural Gas Greg Martin $65,000
The Warehouse Keith Smith $65,000
Ports of Auckland Neville Darrow $60,000
Sky TV Tom Mockridge $50,100
Property for Industry Allan Lockie $45,000
Hallenstein Warren Bell $44,000
NZ Refining Ian Farrant $44,000
Sanford Douglas Goodfellow $25,000
* Annualised
<i>Brian Gaynor:</i> All is not equal in the boardroom
Why do some companies pay large director fees while others are penny pinchers? This is a question many shareholders have been asking as they receive a flood of annual reports in recent weeks.
The list below shows the fees paid to chairmen of New Zealand-based NZSE-40 index companies. The average chairman's
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