It’s unusual for Crikey to hand out the bouquets but our Sydney AGM attendee, Crullers, reckons that Boral’s environmental reporting is as good as he’s seen, notwithstanding numerous objections from the Boral Green shareholders. This is characteristic of the way they dealt with the other hot isssues at the AGM – corporate governance and options.

The wildcard was played by the NSW Transport Workers Union, who handed out flyers prior to the meeting and had their state secretary and a truckie ask a few questions about Boral’s contractual wrangles with some Canberra truck owner-drivers.

But the big news from the meeting was on the voting front.

Sadly, the resolutions all went to polls, which was disappointing from the small shareholders’ point of view as they didn’t get to visibly register their protest against the two controversial points, the re-election of Mark Rayner and Pearse’s options package.

Rayner’s kick in the pants and Pearse’s unpopular options package

Of special interest to Crikey readers would be the re-election to the board of Mark Rayner – he of Pasminco, Mayne Group and NAB fame.

Rayner “only” got 96.8% of the vote, with 6.7 million votes against his re-election, a bit of a kick in the pants in the context of an uncontested board election. Compare that to the other director up for re-election, Roland Williams, who snared 99.4% of the vote, with only about 492,000 votes against him based on the proxies disclosed at the meeting.

The resolution to grant Rod Pearse a further 700,000 options – on top of his existing 2 million – had a pretty substantial 21.5% “no” vote.

The Corporate Terminator, Jack Tilburn, was in fine fettle especially on these two matters, raising the $4 billion in shareholder value that Rayner had blown at Pasminco and the $4 billion that the NAB blew on “HomeSafe”, as the occasionally erratic Terminator called it.

On Pearse’s options package, Tilburn scoffed at the company’s suggestion that granting Pearse 700,000 more options would make him a better MD and align him with the ordinary shareholders. Jack raised many a chuckle when he suggested that the only way Pearse would be aligned with ordinary shareholders would be to grant everyone in the room 700,000 options.

Boral Greens in da house

Chairman Ken Moss fielded another barrage of questions from the Boral Green shareholders and again answered them pretty well, in my view – no doubt others will disagree.

The greens’ main complaint was that the board had struck out a proposed resolution on “technicality”. Their proposed resolution was to get the company to commit to an independent audit of their environmental record.

Moss explained that the proposed resolution didn’t comply with the law, as it didn’t have the requisite number of signatures. He bitingly asked what laws they wanted the company to abide by and what did they want the company to turn a blind eye to, and pointed out that the greens had had 12 months to get their house in order and still couldn’t get this resolution up in an acceptable manner.

About the only complaint that Moss didn’t appear to answer was one shareholder’s point that he had been a shareholder for four years but the company has said his signature didn’t count on the petition.

Both Moss and Pearse devoted significant time in their addresses to covering environmental issues and the company had some seven pages in their annual report on the topic (up from 3 last year – a point commended by one Boral Green shareholder). One could ask what more could they do to placate the greens?

Despite several questioners insisting that the company submit to an independent audit of their performance on the environmental front, Moss wouldn’t budge, as it were. He made the point that “mere compliance” with the law was the minimum, not the company’s objective, and a further independent review on top of the board’s environment committee would not achieve anything.

Truckies’ pay dispute

The Transport Workers’ Union mounted a campaign about negotiations between the company and some Canberra truck owner-drivers, handing out flyers before the meeting and having state secretary Tony Sheldon address the meeting.

He spoke well and raised some compelling arguments, but Moss met his case equally well by saying the AGM wasn’t the place to conduct negotiations with suppliers, and the pay dispute was an issue for management. Moss rhetorically asked whether the oil companies would show up at next year’s AGM and seek a better deal.

MD Rod Pearse pointed out Sheldon’s union connection (something which Sheldon hadn’t raised in referring to himself as a “concerned shareholder”) to the accompaniment of many “ooohs” and “aaaahs” from the crowd.

Sheldon had also raised some good points about the company’s activities at some controversial sites, and again Pearse met this front on and was proud of the company’s record in environmental compliance and rectification work.

Tellingly, he mentioned how the company noted in its annual report its environmental non-compliance, and the figures were on the decrease.

The Corporate Terminator had even raised the issue of the truckies’ dispute, having been handed one of the flyers before the meeting, and Moss said he was “surprised that you are taking on the role of contract negotiator”.

But how is our market share going?

Best question of the day was from a shareholder who noted the company’s boasts on being number one or two in numerous markets around the world for their various products, but asked how this translated into market share.

Rod Pearse said that this was the sort of question he’d like to have answered if he were a shareholder.

But after tantalising shareholders, he (not surprisingly) couldn’t spell out the detail due to commercial sensitivity, but said the company’s market share was “strong and holding” and definitely “not haemorrhaging”.

Bullish outlook

Boral delivered pretty good results during the year – net profit after tax of $192 million was up by 25%. (Mind you, one shareholder disagreed, saying it was a “dismal” result and “Blind Freddy could have done better”.)

But MD Rod Pearse said they would “comfortably exceed” this year’s result in 2003.

In many shareholders’ view this is a pretty bullish assessment given the expected downturn in the local and US economy (which contributed more than 30% of 2002 earnings), but Moss and Pearse stuck to their guns on this one.

Pearse said “the nine months to June 2002 saw a considerable uplift in Australian housing activity. The Australian housing market recovery was faster and greater than expected. The recovery was supported by a low interest rate environment and the Government’s First Home Owner’s Grant.”

Given the latter was a free kick that won’t be repeated and the low interest rate environment is likely to be negated by negative consumer sentiment in driving spending down, I don’t share Pearse’s optimism.

But he’s being paid about $2 million a year more than I earn, so if I were you, I know who I’d listen to.

Corporate governance and options

Once again these two issues were thoroughly discussed. Moss devoted considerable time in his address explaining the board’s corporate governance policies, which all seemed pretty solid.

He outlined the board’s experience which, apart from Rayner’s much publicised black marks, looks pretty well-rounded as a group. He also detailed the function of the audit committee chaired by former PwC auditor Elizabeth Alexander, current auditor KPMG’s partner rotation policy, the statement of independence provided by KPMG and the sourcing of limited non-audit work from KPMG.

Like their statements on environmental performance, it is hard to flaw Boral’s statements on corporate governance. Maybe I’ll just have to cut back on my medication prior to next year’s Boral AGM.

The annual report also contained a three-page discussion on the company’s corporate governance policies.

And, unlike Gary Pemberton, who at the NSW TAB AGM told us that he didn’t think it necessary to disclose the monetary value of transactions with director-related entities (and, in fact, that non-disclosure was the accepted practice in his view), Boral spells every such amount out.

Even the supply of electrical power by Boral to Centennial Coal (of which Moss is a director) for a trifling $24,000 was picked up. There’s a flea on an elephant’s behind for you, Pembo!

On the options front, Moss was again well prepared and presented the same table as last year showing how much Pearse’s options would be worth to shareholders in terms of increase in market value of the company. About the only thing you could fault on this front is that it could have been distributed to shareholders prior to the meeting to give them a chance to digest it.

Moss said “the exercise hurdle for Boral’s executive options remains amongst the toughest in the marketplace and benefits will only accrue from the options if Boral achieves strong shareholder returns.”

And another tick for Boral – the annual report stated what the cost of last year’s options grants would be if expensed to the profit and loss statement ($1.8m). Moss said they would expense the options as soon as a uniform accounting standard could be agreed upon.

Jack Tilburn asked why the company couldn’t “jump on the bandwagon”, introduce a deferred share plan and jettison its options package.

Moss said the shareholders would expect better of their board than to just “jump on a bandwagon”.

Asleep at the wheel

And far be it for us at Crikey to take cheap shots at anyone, but did we again notice director Roland Williams dozing off several times during the meeting, as he seemed to do at last year’s AGM?

An alert member of the paparazzi seemed to spot it and capture a few shots for posterity.

We’ll see if the incriminating evidence turns up anywhere.

In his defence, Williams did not opt to hide behind the chairman’s coat-tails when asked about his multiple-directorships and gave a reasonably compelling address in his defence, albeit trotting out lines that AGM veterans would have heard many times over.

Catering

Finally, if regular Crikey readers are perplexed as to why this write-up is so uncharacteristically complimentary, perhaps there was something in the water at the post-AGM nosh-up.

Or, to be more specific, something in the party pies, sausage rolls, sushi rolls, bagels with smoked salmon, lamingtons.. I could go on for days.

First class catering, Mossy – I’ll be back next year and making my contribution to Boral’s 2004 profit by renting one of your concrete trucks to act as my doggy bag.

Peter Fray

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