Fancy a 36% pay rise this year? Well, that’s the LEAST of the pay rises that is being asked for by the exclusive company directors’ club at this year’s round of AGMs.
As sure as several Jack Tilburn sprays at several AGMs this year is that our esteemed company directors will put out the begging bowl again this year, asking shareholders for another pay rise. (Incidentally, Australia’s feistiest shareholder activist’s book has hit the stands – check it out at www.jacktilburn.com.)
It always beggars belief that these pay rises invariably get voted through with overwhelming majorities – you can put that down to our institutional investors, as there is usually a fair bit of shareholder disquiet at AGMs when resolutions come up to increase directors’ pay.
Crikey has already covered Australia’s most outrageous golden parachutes, executive options profiteers and pay packets, now it is time to have a look at the non-executive directors who are going to shareholders this year with cap in hand and asking for a pay increase.
Heading the list is crusty old Harold Clough and his mates at Clough Limited, who are collectively looking for a 200% rise!
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Can you imagine any employee group in the country putting in such a claim?
Can you even imagine a group of employees anywhere collectively asking for – and getting – a pay increase of 36%?
But that’s how much of an increase that Margaret Jackson and her NED pals at QANTAS are collectively asking shareholders to approve.
And 36% is the LOWEST of all the directors’ fee increases that is being asked for out of the 13 companies on our list so far!
Of course, our chums in the exclusive directors’ club will tell us that they haven’t had an increase for X years – gee they’ve been doing it tough in the meantime, it brings a tear to the eye – and they need to increase their fees to :
– ensure that the Group is able to adequately reward its directors and attract appropriate skills and knowledge for the Board,
– attract and retain the best directors,
– provide the capacity for the fees paid to Non-Executive Directors to remain competitive with market forces,
– remunerate Directors for their involvement on Board sub-committees,
– enable further increases in the number of Board Members as the Company expands its operations.
We should try to copyright this template – it is already proving popular.
See if you can spot the differences between the explanatory notes provided to the shareholders of Nifty Neville Wran’s Abigroup and our nominee for Australia’s worst company director, Stan Howard, and his Hill’s Motorway Group:
Abigroup – “The aggregate level of Directors (sic) remuneration has remained unchanged since 1996. The proposed increase will provide the capacity for the fees paid to Non-Executive Directors to remain competitive with market forces, remunerate Directors for their involvement on Board sub-committees and enable further increases in the number of Directors as the Company expands its operations.”
Hill’s Motorway – “The aggregate level of Non-Executive Directors (sic) remuneration has remained unchanged since 1998. The proposed increase will provide the capacity for the fees paid to Non-Executive Directors to remain competitive with market forces, remunerate Directors for their involvement on Board sub-committees and enable further increases in the number of Board Members as the Company expands its operations.”
They even include an identical failure to use the possessive apostrophe!
Isn’t it remarkable how such different companies have such similar needs?!
As a shareholder, one would hope that our directors could put some original thought into their pay claim. Remember – the directors are asking we the shareholders to approve their pay rise.
It just shows the contempt that they have for the process – it seems that all they consider it to be is a rubber-stamping job and therefore they don’t have to put any effort into justifying their case.
Again, put it down to the lazy instos who will approve these claims almost universally without question.
Another old doozy that the company director club likes to trot out is that “of course, this is merely the MAXIMUM aggregate remuneration that the board can be paid – there is no requirement that this be paid in full”.
That’s true, but we wonder how many directors do set their pay significantly below the maximum possible remuneration? Remember, once the shareholders have approved the maximum limit, the directors then decide how the pay packet will be split up.
When I received my annual report and Notice of AGM from a medium sized gold-mining outfit called Croesus Mining, I was puzzled by the apparent contradiction between the two.
In the Notice of AGM, it puts forward the resolution “That the pool of fees payable to Directors be increased from $161,000 to $300,000.”
Strangely, the annual report reveals that they are paying their 3 NEDs $173,500 in directors’ fees.
That’s not all. On top of the “base salary”, they pocket another $15,615 in superannuation and $28,400 in “other benefits”.
This makes for total NED remuneration of $217,515.
So it seems that, unless I’m not reading the annual report correctly, total remuneration for the directors is some 35% greater than the maximum that shareholders have previously approved!
This is strange indeed – anyone who can make Croesus’ AGM in Kalgoorlie is more than welcome to my proxy to clear this one up for me.
As a shareholder, I would be furious if the directors were being paid more than shareholders have previously approved.
One would also expect that if the directors were being paid more than the shareholder-approved maximum, this would contravene the Corps Law, would it not?
Finally, if we take the lowest of all the directors’ collective fee increase resolutions, QANTAS’ 36%, shareholders should ask themselves the sort of questions that management might ask the rank and file employees who put in a pay claim:
– have the directors become a 36% more efficient group during the year?
– has the job of directing the company become 36% more difficult during the year?
– has the company expanded its activities to such an extent that the job of directing the company has become 36% more time-consuming?
– is there a pressing need for 36% more talent in the pool of directors?
We doubt that any of these questions could be answered in the affirmative, at least not to the extent that the directors are asking for their pay packets to be beefed up.
About the only argument that can be sustained is the old “market forces” line.
There is a simple solution to this – the institutions band together and say “enough is enough” and vote down all pay claims unless they are modest. Of course, the directors of the instos are riding the gravy train themselves, so there is not much chance of that happening.
Most employees are lucky to get more than a CPI increase each year, why should directors be any different?
We would submit that unless there have been extraordinary changes in a company’s operations requiring extensive changes to the board’s collective responsibilities, then an increase of more than, say 10% per annum, should be shot down.
Crikey will be watching these polls very closely but we fear that the results are a fait accompli.
Kerry Stokes at Seven Network set an admirable precedent last year with the directors volunteering a pay cut because of the company’s poor result. But that is the only such example we can remember.
It just shows again that company directors have no clue when it comes to shareholder sensitivity to remuneration.
Here is our list of 13 companies whose directors have asked for a pay increase. This takes into account the Notices of AGM for the bigger companies that have been sent out up to the first week of October, so we expect there are plenty to come (such as the banks, with AGMs in December) and a few of the smaller companies that we have missed:
Clough – “That the maximum aggregate amount of fees that may be paid per annum to Non-Executive Directors of the Company be increased by $400,000 from $200,000 to $600,000.”
Croesus Mining – “That the pool of fees payable to Directors be increased from $161,000 to $300,000.” Strangely, Croesus’ 2002 annual report reveals that they are paying their 3 NEDs $173,500 in directors’ fees, plus another $15,615 in superannuation and $28,400 in “other benefits” – total NED remuneration of $217,515. This contradicts the explanatory notes in the Notice of AGM, which states that current directors’ fees are $70,000 for the chairman and $38,000 for the NEDs. Admittedly, Croesus’ revenue almost quadrupled during the year following its merger with Central Norseman Gold. But does this translate to an almost doubling of directors’ workload to justify the pay increase being sought?
Skilled Engineering – “That the maximum aggregate amount of fees payable to Directors, for their ordinary services as Directors, be increased by $150,000 to $400,000 per year.”
Newcrest Mining – ‘That the aggregate sum per annum available for payment to the non-executive Directors of the Company in accordance with Rule 58 of the Company’s Constitution as remuneration for their services to be increased by $300,000 from $500,000 up to a maximum sum of $800,000 per annum.’
Abigroup – To consider and if thought fit, to resolve that pursuant to Article 19.1 (a) of the Company’s Articles of Association, the maximum aggregate annual remuneration which may be paid to the Company’s Non-Executive Directors be increased from $300,000 to $450,000.
Coates Hire – “That the maximum aggregate amount of directors’ fees payable to Directors by the Company be increased by $100,000, from the current maximum of $200,000 to $300,000, including for the purpose of ASX Listing Rule 10.17.”
Infomedia – “That Rule 7.3(b) of the Constitution of the Company be modified effective immediately upon the passing of this resolution by deleting the symbol and numerals “$300,000” (three hundred thousand dollars) and replacing them with the symbol and numerals “$450,000″ (four hundred and fifty thousand dollars).”
Hill’s Motorway – To consider and if thought fit, to resolve that pursuant to Article 12.15 of the Company’s Articles of Association, the maximum aggregate annual remuneration which may be paid to the Company’s Non-Executive Directors be increased from $400,000 to $600,000.
Wattyl – “That in accordance with Listing Rule 10.17 of the Australian Stock Exchange Limited and rule 41 of the Company’s Constitution the aggregate maximum amount of remuneration of the non-executive Directors be increased by $200,000 per annum to $600,000 per annum.”
Collection House Limited – Non-executive directors’ remuneration – To increase the maximum aggregate remuneration for Non-Executive Directors from $350,000 to $500,000.
Centro – “Given Centro’s continuing growth, the capacity for additional directors to join the board, especially for succession planning, is important. The aggregate remuneration limit for non-executive Directors has not changed for three years. While there is no immediate requirement to utilise any increased amount, an increase is proposed from $500,000 to $700,000…”
Computershare – “That the maximum aggregate annual remuneration of non-executive Directors be increased by $140,000 to $500,000.”
QANTAS – “That the maximum aggregate amount payable to Non-Executive Directors by way of Directors’ Fees be increased from $1,100,000 to $1,500,000 per annum.”