KEY POINTS:
Thousands of Contact Energy customers are this week getting letters telling of 10 per cent price rises - as the company prepares to nearly double its directors' fees pool to $1.5 million.
The fee rise is opposed by many of the company's 20,000 small shareholders, but will be
passed with the backing of Contact's Australian majority owners at a meeting in Auckland tomorrow morning.
The decision will come a week after directors at energy supply company Vector dropped a bid for a 22 per cent increase because of the worsening economy.
Contact independent director and deputy chairman Phil Pryke is already paid $1000 a day from a pool of $770,000 split among four directors.
A Contact spokesman last night said the number of directors paid from the expanded pool would increase to six but how and when the cash would be allocated would be up to the board.
Contact says its size and complexity and international benchmarks justify the rise, the first since 2004.
But in analysis done for minority institutional shareholders by RiskMetrics Group, the usually conservative firm has urged shareholders to vote against company recommendations on remuneration and against re-appointing Mr Pryke and non-executive director John Milne.
Energy Minister David Parker said it was the wrong time to put up fees.
Directors were already well paid, and the increases "would be an extraordinary move at a time when most people are having to tighten their belts, and at a time when Contact Energy is raising electricity prices".
The minister said directors on state-owned energy companies were paid less than half the amount proposed by Contact and he gave the company a warning.
"The Government has already said it is concerned about the recent hike in Contact's electricity prices, and we remain concerned about whether the electricity market is operating effectively to constrain excessive prices and excessive cost structures."
Reports were due soon from the Commerce Commission and the Electricity Commission into the adequacy of competition in electricity markets.
Contact workers covered by the Engineering Printing and Manufacturing Union working for Contact had been given pay increases of about 15 per cent over the past four years.
"The culture of massive directors fees is offensive in light of the disaster befalling the world because of companies whose bloated rewards for directors and senior executives bore no relationship to the value being created," said union secretary Andrew Little.
Australia's Origin Energy owns 51 per cent of Contact, which is forecasting flat profits after making $237 million in the past year.
The Shareholders Association is predicting fireworks tomorrow in the tradition of acrimony that has been part of Contact meetings since it was listed on the sharemarket in 1995.
Annoyed shareholders targeted Mr Pryke two years ago over a failed $8 billion merger he championed with Origin.
Last year, 70 per cent of non-Origin shareholders unsuccessfully voted against the re-election of Tim Saunders, former chairman of failed carpetmaker Feltex.
Brook Asset Management fund manager Paul Glass said New Zealand directors were generally underpaid, but they needed to be of a high calibre.
"Our view is very clearly that it's time for Phil [Pryke] to pack up his tent and go."
Business commentator and Milford Asset Management executive director Brian Gaynor said the board was out of touch.
Contact directors had inherited a utility company with taxpayer-funded assets, and had not had to build the company themselves.
"They argue that because they're the biggest they should be paid like people offshore," he said.
"The insensitivity of these guys and the way they thumb their noses at everybody is fraught with danger. It's a very stupid policy especially when we're heading into a very difficult time economically."
Origin's continued promotion of the long-serving Mr Pryke - who lives in Sydney - and Mr Saunders was bizarre, as they were rarely seen in local business circles, he said.
"These guys have got out of touch. You want directors who are part of the business scene and have good connections."
In Wellington yesterday Greypower's central city president, Duncan McDonald, got a letter from Contact subsidiary Empower saying his home power bill would go up $35 a month from November 1 "due to the changing costs".
"It's appalling - they've got no concern about their customers. It couldn't be worse with the economy in such a bad way."
Efforts yesterday to contact Mr Pryke through Contact and at his Sydney home were unsuccessful.
