Let’s see how the Coles Myer barney unfolded in Crikey sealed sections over the past week.
Sep 10 sealed section
Take a bow Stan Wallis. As a tree lopper from way back, you never had a clue about retailing and you’ve finally recognised this and done the right thing by bowing out as chairman of Coles Myer after almost five years.
This is the brief statement Coles put out as the market was closing yesterday:
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“Chairman of Coles Myer Ltd, Stan Wallis, today announced that he will not seek re-election as a director of the Board at this year’s annual general meeting. Mr Wallis said he intends to remain as Chairman and as a director until the conclusion of the AGM on 20 November. In the interim, the Board would be considering the appointment of a successor, after which an announcement would be made.”
Crikey was actually planning to call for a candidate to run for the Coles Myer board in today’s sealed section. But Stan wasn’t the primary target because Solomon Lew is up for re-election this year and he continues to cause a smell on the retailing giant’s board after the notorious Yannon scandal and his ongoing conflicts of interest.
If ever there was an example of institutions being unwilling to vote against any incumbent director, it was the 1999 Coles Myer AGM where Solly got 428 million votes in favour and only 9 million against.
This was before Solly dumped his personal holding for more than $700 million at $8.38 a share in early 2000, leaving only the 4.9 per cent parcel held through the listed Premier Investments.
The two other directors re-elected for three year terms in 1999 were Nick Greiner and Stan Wallis and with both of them now gone or going, it will be interested to see who else joins Solly on the ballot this year.
Any one fancy putting their hand up.
Crikey would like to see either Bill Gurry or Ric Charlton step up to the mark and take over from Wallis as chairman. Charlton has retail experience through his years running Shell so he’d be our preferred candidate. He’s also a very hard man which is what Coles needs at the moment.
Gurry has loads of integrity and, if you believe some of the stories going around town, is one of the few blokes who told Ron Walker to get stuffed when he was belligerently demanding large donations to the Liberal Party in the 1990s.
SOLOMON LEW LOSES THE PLOT
Sealed section Sept 12
Solomon Lew has not got a clue when it comes to PR. He showed it the first time with the Yannon transaction, he showed it again during the failed Ansett rescue and now he’s done it again with his public attack on outgoing Coles Myer chairman Stan Wallis.
Lew apparently got rolled by the rest of Coles board in not claiming Wallis’ scalp last night. He should have been booted off the Coles Myer board during the 5-year ASIC investigation into Yannon. Now he’s publicly attacking a lame duck chairman all over the question of who leads Coles Myer through its upcoming AGM.
Solly’s new attack dog, ageing corporate raider Sir Ron Brierley, is right to label the Wallis years at Coles Myer “disastrous”, but there would have been no momentum to give Lew and Leibler the boot if Solly has just kept his trap shut.
He will not repeat the 98 per cent vote he got when last re-elected in 1999. It would be great to see him voted off the board and Crikey is looking for subscribers who are keen to put their name in the ring and help create a Melbourne Cup field for those three vacancies at this year’s Coles Myer AGM.
SOME WISE WORDS ON SOLOMON
Sealed section Sept 13
Being Australia’s only serial board candidate can have its advantages when it comes to precedent setting. A look back at what happened at the Woolworths board election in 2000 explains precisely why Solly Lew is desperate to remove Stan Wallis as Coles Myer chairman before the November AGM.
I got 58 per cent of the proxies voting in favour of my nomination for the Woolies board but then chairman John Dahlsen duly pulled out the open and undirected proxies sitting in his back pocket and reduced me to 44 per cent.
This is precisely what Stan Wallis is planning to do to Solly Lew and Mark Leibler and the way that corporate elections are run in Australia make this gang of two eminently rollable.
Stan will know precisely what the situation is because he casts the open proxies so he’ll be able to do it and then retire gracefully knowing that Lew and Leibler are following him out the door.
COLES MYER DEVELOPMENTS
Second sealed section Sept 13
Solomon Lew and Mark Leibler are really fighting hard as the lads have produced a legal opinion disputing whether they are both up for re-election this year.
It is good to see the secretive world of corporate elections finally getting some attention and the L faction fight might have a point.
The Corporations Law says that one third of the board must face election each year so this means that a stable board of directors has rotating three year terms.
But recent departures from the Coles Myer board cloud the issue. There is no doubt that both Solomon Lew and Stan Wallis were facing re-election this year as shareholders last voted for them back in 1999. But the third candidate that year was Nick Greiner and he is long gone.
So why is Mark Leibler also on the re-election slate this year? He was re-elected in 2000 along with Ric Charlton and Rick Allert. Is it fair that he only get a two year term? How did they decide that he must face shareholders this year?
Obviously, the most recent new director in Bill Gurry must face the shareholders along with Lew this year but this does not satisfy the requirement that one-third of the board be spilled.
Presumably this is why Leibler is fighting so desperately to give Wallis the boot now and appoint a new director who will be the third facing election at the AGM.
The three who faced the poll last year were Martyn Myer, Helen Lynch and Patricia Akopiantz.
The striking feature of the Coles Myer board is the lack of directors who sit on a multitude of listed boards. Lew, Gurry, Leibler and Akopiantz only have the Coles Myer board on their CV whilst Martyn Myer and Ric Charlton only have tiddlers in Diversified United Investments and Adcorp respectively.
With Wallis going, this will only leave Helen Lynch and Rick Allert as establishment professional directors with a portfolios of blue chip boards that they serve on.
Speaking of the board, Crikey has heard rumors that shoe retailer and the man who was almost Melbourne’s first directly elected Lord Mayor, Peter Sheppard, is announcing a tilt at the Coles board today but we haven’t had it confirmed yet. That would shake things up a bit.
Finally, if you want to understand the power a chairman has at an AGM, these are the proxy figures from Crikey’s tilt for the Woolworths board in 2000.
Open proxies: 51.56m
They claimed I was defeated on a show of hands and therefore never reported the final figures to the ASX but at the meeting they flashed up figures on the screen showing that chairman John Dahlsen had voted the open proxies against me and this had cut me down from 58 per cent of the vote to only 44 per cent. Expect Stan Wallis to do the same to Solomon Lew and possibly Mark Leibler, if he arranges for him to face a poll this year.
COLES MYER OVERLOAD
Special Saturday sealed section Sept 14
It seems that every paper in the country has a massive read on the Coles Myer bunfight this morning. Solomon Lew’s spindoctors, presumably Simon Crean’s former adviser Michael Macleod, has been busily briefing everyone from The Age’s Stephen Bartholomeusz to the Fin Review’s Adam Shand.
The threats from Lew are very transparent: take me on and I’ll cause an enormous amount of damage, spend millions of dollars on the campaign and release all this inside dirt to damage your name Stan Wallis.
This is just like the Anne Keating and Nick Whitlam bunfight at the NRMA rather than backing one side or the other, Crikey reckons both are very ordinary and should get the hell out of Coles Myer.
The Age and the Herald Sun have reported details of Peter Sheppard’s tilt at the Coles Myer board today which is a welcome injection of fresh blood.
Sheppard was almost Melbourne’s first directly elected Lord Mayor and built up a shoe retailing business than turns over $20 million a year and is offering a renewed focus on customer service and old-fashioned retailing at Coles Myer.
The only comparable tilt that Crikey has ever seen was the printing joint venture partner of PMP who ran for their board last year and got almost 30 per cent of the vote.
If Solly gets the boot, Coles will have no-one with operational retail experience on their board so this might just open a window for someone like Sheppard to come through the middle.
The question we raised yesterday about why Solly’s personal solicitor Mark Leibler is up for re-election this year after just a two year term was answered by Terry McCrann in this morning’s Oz. The names of the directors re-elected in 2000 Mark Leibler, Ric Charlton and Rick Allert – were placed in a plastic bowl at the August 22 board meeting and it was Leibler’s name that emerged to join Lew and new director Bill Gurry up for re-election at this year’s AGM. Leibler is now waving around legal opinions challenging this on the spurious grounds that the directors weren’t consulted before the ballot took place.
Ironically, the auditor conducting the ballot was from PWC, the same firm which ticked the Yannon transaction and somehow hung on to its job. That was just as bad as NAB giving KPMG another five year auditing term in spite of the Homeside debacle.
Stan Wallis was at his taciturn best in Sunday’s interviews with both Business Sunday and Inside Business. McCrann is right to savage him for not keeping his shareholders informed. Everything is “a private board matter” or “I’m not getting into that”. The guy has stuffed every board he’s sat on since leaving Amcor and one of his problems is this idea that everything is top secret.
As Sir Ron Brierley said yesterday, the next big step in this process comes with the distribution of the notice of meeting. Wallis says it is now accepted corporate governance that boards tell shareholders how they will be voting the open proxies and recommends what they do.
Crikey reckons this idea of board endorsement or disendorsement is bad corporate practice because it makes it virtually impossible for an outside director to get elected. The boardroom just becomes a closed shop. When I ran for the NAB board in 2000, chairman Mark Rayner said he would not be voting the open proxies as a matter of good corporate practice.
Finally, the board should not dictate to shareholders how many directors Coles Myer has. Therefore, if Peter Sheppard gets 50.1 per cent of the vote, he should be on the board. Rupert has adopted this practice but I’m betting Coles Myer will do the old “four candidates but only three spots” routine as a way of keeping Sheppard off the board even though it is now arguably on the small side.
Solly Lew’s Coles Myer record
Sealed section Sept 16
Sir Ron Brierley and Stan Wallis were both interviewed on the competing Sunday morning business programs as the battle for the hearts and minds of Coles Myer shareholders and the media fires up.
Sir Ron Brierley claimed that Solly Lew’s term as chairman of Coles Myer were the halcyon days for the retailing giant in terms of performance.
But Stan claimed that the first 4 years of his 6 year tenure on the Coles board included terrific performance. So who is right?
The first time Solly got any real power at Coles Myer was when it was announced he would be co-chairman alongside Brian Quinn in May 1991.
He then expedited the departure of Quinn by taking over as sole chairman in November 1991 and then appointing Peter Bartels to replace the retiring Quinn as CEO in July 1992.
The 11-year share price graph printed out from ComSec this morning shows that Coles Myer was trading at about $5.50 in May 1991 when the market was first told Solly was the man.
On the day Quinn left and Bartels took over they were on their way back down from a recent peak of $6.30 and then spent the rest of Solly’s term as chairman wallowing between $5.50 and $4.
Solly was ousted as executive chairman after the Yannon peace deal in October 1995 when the share price was still wallowing around the $4 mark.
It edged higher for the next 15 months to about $4.50 in January 1997 and then it took off under chairman Stan Wallis and CEO Dennis Eck, peaking at more than $9.
As Wallis pointed out yesterday, Lew took advantage of this stellar performance and dumped $700 million worth of shares at $8.38 in early 1999.
It was only about 6 months later than things started going off the rails and Coles Myer have now had three bad years in share price terms punctuated by a brief surge after John Fetcher took the reigns.
But Sir Ron Brierley cannot be allowed to get away with his claim that Solly presided over Coles during its glory days. The stock was trading close to $5 on the day he became co-chairman in 1991 and they were less than this on the day he quit in October 1995. However, they did almost double from 1989 to 1991 but most of this rise was before Solly took over.
During the four years that he was undisputed chairman and in control of Coles Myer, the share price went down and then in doubled in the subsequent four years when he was just a non-executive director.
Stan Wallis has still performed dismally over the past two years and is right to resign, but Solly Lew is definitely not the answer to Coles’s problems.
ASIC CALLS FOR GREATER DISCLOSURE
Meanwhile, ASIC has just put out a statement including the following comments from chairman David Knott:
“Mr David Knott, Chairman of the Australian Securities and Investments Commission (ASIC), today emphasised the importance of restoring long-term stability to Coles Myer Limited’s governance structure.
‘The current instability at Coles Myer is a serious cause of confusion and concern. It appears increasingly likely that shareholders will be required to make important decisions at the November annual general meeting affecting the composition of the Board and the future direction of the company’, Mr Knott said.
‘In order for them to do so, they need to be fully informed of the contested issues and of any differences in strategic direction being advocated for Coles Myer by relevant directors or shareholders. The current level of publicly available information about all of these matters is inadequate’, he said.
ASIC is also calling on all shareholders of Coles Myer to inform themselves of the issues at stake ahead of the annual general meeting and to exercise their votes in person or by proxy.”