While Australian stock markets rebounded with vigor, and property prices continued to bubble away, spare a thought for those who made it all possible, and who made 2009 truly a year to remember.
‘Non-Bonus’ of the Year
To Mark Rowsthorn and the Asciano board. After a near shareholder revolt in 2008, Rowsthorn agreed to voluntarily forgo $750,000 of his 2009 short-term bonus. What Asciano shareholders didn’t count on was the company increasing Rowsthorn’s base bonus in 2009. (This seemed a little like a department store proclaiming everything is 50% 10 minutes after doubling prices).
The son of Toll’s first chairman (and brother of funnyman Peter Rowsthorn) received a notional bonus of $1.5 million in 2009 — an increase on the previous year. This was despite Asciano reporting a record $244 million loss, its unit price falling almost 90% in two years and the entity being forced to undertake an emergency equity raising. Asciano had been spun-off from trucking giant Toll Holdings in June 2007 for $10 per security.
Political Operative of the Year
To former Treasury employee Godwin Grech, who fancied himself as something of a political Svengali. After unsuccessfully trying to create the “Utegate” furor through a series of faked emails (which backfired on Godwin and contributed to the downfall of Malcolm Turnbull), it was revealed that Grech had many conversations with John O’Sullivan, Australian boss of investment bank Credit Suisse. Grech had told O’Sullivan he would “change [Treasury] contracts” to reflect Credit Suisse’s preferred fee and, perhaps ironically, that the “Treasury is as left-wing loony as the government it serves”. Grech was even kind enough to suggest newspaper article ideas for O’Sullivan’s wife, opinion columnist Janet Albrechtsen.
Fortunately for Grech, a Parliamentary committee found that he had not “knowingly and deliberately [given] gave false or misleading evidence to the economics legislation committee”, largely on the basis that poor Godwin wasn’t quite with it. We are unsure whether his love of Janet was the principle piece of exculpatory evidence.
Tiger Woods Award for Saint to Sinner of the Year
Former Wesfarmers CEO Michael Chaney, once known as ‘Saint Michael’ for his near flawless tenure as boss of the Western Australian-based conglomerate, has seen his halo fade somewhat this year. This was after NAB (which is chaired by Chaney) undertook a series of highly dilutive placements to institutional investors.
To placate smaller shareholders, in August NAB conducted a ‘share purchase plan’ and quickly received $2.6 million in applications. Apparently at NAB, some shareholders are more equal than others, with the bank suddenly not needing the money and deciding to promptly return $1.85 billion straight back to its mum-and-dad owners. NAB claimed that raising so much new equity wasn’t really a good idea because it would mean that the bank was holding “excess capital”. Chaney and the board must have had short memories — a mere 18 days later it raised $US600 million in Tier 1 hybrid capital notes.
A close second goes to Westpac’s Gail Kelly for managing to nearly destroy Australia’s the reputation of Australia’s largest banks after raising variable mortgage rates by almost double the Reserve Bank’s rise in December. Kelly then made the problem worse by demoting Westpac’s retail chief, Peter Hanlon, and circulating an infamous video that compared home loans to banana smoothies. Kelly also managed to overpay for her old employer, St George, by a lazy $500 million.
Corporate Governance Campaigner of the Year
To the founder of RAMS Home Loans, John Kinghorn. Kinghorn told the RHG annual meeting on November 13 that he “would be astonished if the regulator were to lay charges against [former Allco boss and RHG director David] Coe”. Kinghorn explained that “Mr Coe has made an invaluable contribution, particularly in the areas of corporate governance, which may surprise you”.
David Coe has certainly made an invaluable contribution to governance, but possibly not in the manner Kinghorn was suggesting.
Coe was the former executive chairman of Allco Finance Group, which collapsed in 2008 with billions of dollars in debt. Shortly before Allco’s collapse, it had purchased the Rubicon property management business from Coe and partner Gordon Fell. Coe received more than $12 million cash from the sale. At the time, the auditor of Rubicon’s managed funds warned that the funds faced uncertainty as a going concern. ASIC is also believed to be investigating Allco’s incorrect disclosure of liabilities and the grant of a $52 million “line of credit” to Coe and fellow executives shortly before Allco’s collapse.
Premature Ejection of the Year
To James Packer, long-time supporter and former chairman of online employment classified and education business Seek. In August, Packer sold Consolidated Media’s 22% stake in Seek for $5.05 per share, reaping $440.8 million. Packer is believed to have used the funds as a war chest to stave off rival media mogul, “Little” Kerry Stokes, who was building a sizable stake in CMH. Packer’s sale may have been somewhat premature. Under the superb guidance of Andrew and Paul Bassat, Seek’s share price has since risen to $6.83, meaning that Packer’s hasty sale has cost him more than $155 million.
Phil Green Memorial Award for Remuneration the Year
To chief executive of Sims Metal Daniel Dienst. 2009 wasn’t a great year for Sims shareholders (its share price remains less than half of its July 2008 peak) or its employees (1200 of who are now needing to look for alternative employment) but that didn’t affect Dienst too much. The American-born CEO was rewarded with a short-term cash bonus of $2.7 million on top of fixed cash pay of $1.3 million despite the company reporting a $150 million loss (Sims appears to pay executives short-term cash bonuses that aren’t even based on any specific metrics, but resemble a retention payment). Arguably, Dienst didn’t really need the money anyway — his holding in Sims is worth about $20 million.
Corporate Benefactor of the Year
To Goodman Group chairman Ian Ferrier for utilising his expertise as one of Australia’s leading insolvency practitioners in driving Goodman to the brink of collapse. In February 2009, Goodman Group paid unit holders a distribution of $264 million — $90 million less than the group’s operating cash below and $55 million less than its operating profit (Goodman Group also reported a net loss of $450.4 million for the half-year). At the time, Goodman Group also faced a looming $460 million debt refinancing. The decision to pay the handsome distribution (which substantially benefited the cash-strapped Goodman family, who pocketed about $70 million) soon backfired — soon after Goodman (the company) was forced to borrow $500 million from Macquarie and China before undertaking a highly dilative $1.3 million equity raising.
Goodman Group attracted more controversy later in the year when it agreed to buy an asset from the Goodman Family for more than $100 million. Some unit holders questioned if the Moorabbin Business Park was such a great property, why were the Goodman’s selling it to a company they barely owned? Further showing their commitment to the company, Greg Goodman and brother Patrick flogged 69.5 million shares (almost their entire stake) for $46.5 million in November (the sales were allegedly undertaken by an investment bank, which previously “shorted” Goodman Group units to hedge any risk). The Goodmans didn’t turn their back from the group entirely though — they extended their hands and requested eight million free performance rights later in the year.
Thelma and Louise Award for Taking the Law into ones own hands
To the four German pensioners who allegedly kidnapped their 56-year old American financial planner, binding him with masking tape and bundling him into the boot of a car after hitting him over the head a walking stick. The fiendish ploy was only temporarily held up after one of the abductors ran out of breath. The kidnappers were apparently annoyed after their planner lost their life savings, recommending investments in Florida property (which has fallen in value by up to 50%) and Kuwaiti funds. No word yet on whether ASIC has hired the affable Germans to deal with financial planners involved with the collapses of Westpoint, MFS, Timbercorp or Great Southern Plantations, although we suspect their services may be highly in demand.
See you next year!
Adam Schwab is the author of Pigs at the Trough: Lessons from Australia’s Decade of Corporate Greed (featuring detailed analysis of what went wrong at ABC Learning Centres, Allco, MFS, Telstra, Asciano and many more). Available in March 2010.