CEO says council-owned body needed expert advice on its subsidiary companies.

Innovation Waikato is defending spending twice as much on directors' fees as other part-owned council entities - despite lower returns.

Chief executive Derek Fairweather said the high fees - which contributed to the group's $475,730 deficit last year - were caused by tapping into important expert advice to get two new subsidiary companies off the ground.

At Hamilton City Council's finance and audit committee yesterday, councillor Ewan Wilson questioned why the group spent $233,245 on directors' fees in the year to last June when Waikato Regional Airport's fees were only $104,000 and Hamilton Riverview Hotel's were $85,596. Both companies returned much larger profits.


He was also concerned that a new board set up independently of the parent group Innovation Waikato to oversee its subsidiaries Beef Solutionz and Dairy Solutionz had been paid fees of $92,500 when only one of the entities (Dairy Solutionz) had traded.

The two subsidiaries contributed $213,000 in income to Innovation Waikato, but cost it $173,000 in expenses.

Dairy Solutionz and Beef Solutionz are focused on helping agricultural firms expand export sales and plan to set up at least three farms by the end of 2013.

But Mr Fairweather said the spend was justified, and could not be compared to the airport or hotel group.

"When you are doing something that is innovative and first to market, having the calibre of people is important.

"We are closing $100 million of deals. None of your businesses have ever put in that level of growth."

Mr Fairweather said the business would begin to pull back on the level of money and type of directors now the subsidiaries were both trading.

The group, which runs Innovation Park in Ruakura, reported both office buildings were fully tenanted and work on a third office building was earmarked for next year.

Innovation Waikato has previously estimated it would need $142 million to transform the farmland into a 19-building park.

The last building cost $9 million and opened in mid-2009.

Last year Hamilton City Council converted its $2.4 million loan to a 19.8 per cent share in Innovation Waikato. The council agreed in October to sell its shares to Eden Agricapital which is now trying to raise capital.

Mr Fairweather said the council could start budgeting that it would get its money back, but there was no set date at this stage.

Innovation Waikato's other shareholder, Katolyst, holds the remaining 80.2 per cent and this trust is also linked to the city council.