The new directors of DVT, formerly the almost terminal Davnet, have battled hard to make something of the company, but shareholders are still not a happy bunch.

Chairman Geoff Lord did his best to “simplify” the 13-resolution notice of meeting, but no matter what spin he tried to put on it, shareholders generally weren’t happy, in particular the ASA’s Giles Edwards.

Edwards’ beef in particular was with the grant of options to some past directors and current non-executive directors which had no clearly enunciated and transparent performance hurdles, some were open to the directors themselves to set their own hurdles, and weren’t long term. Some were exercisable immediately, others within the first year of their grant.

Edwards pointed out that rules one and two in the book on corporate governance is that you don’t award options to NEDs – their job is to protect the shareholders, and awarding options flied in the face of that duty – and if you do award options to executives, they should provide some form of long-term incentive.

Chairman Geoff Lord battled manfully to try and placate Edwards, but in the end had to agree with him on many of his arguments and conceded that most of the resolutions being put to shareholders today were carry overs from the bad old days of Davnet. They had asked the old Davnet / DVT executives and directors to forfeit their previous benefits and promised they would be reinstated once Davnet / DVT had merged with USC, the company which Lord has been chaired.

Of the thirteen resolutions, the more procedural of them passed without incident.

But when we moved to the shares and options grants, the meeting heated up.

The resolution to adopt an executive option plan was voted against by a show of hands and in fact it probably would have almost been voted down unanimously but for about three or four who were in favour.

Edwards hammered Lord on this one, saying he was “strenuously opposed” to it and first pointing out that the company was in the middle of a buy-back, which should in theory inflate the share price. Therefore, he argued that the exercise price for the options should be correspondingly raised.

The contrary argument to this was laid out by Gary Pemberton last week at TAB – namely, a buy back doesn’t affect share price because if it did, no-one would participate as it would make more sense to wait for the share price to increase and then sell on the market.

But Lord obviously hasn’t been around the traps as long as Pembo and didn’t have the ready-made retort handy!

Despite the obvious dissent in the room, the proxies were overwhelmingly in favour, with only about 20.9 million of the 900 or so million proxy votes being cast against this resolution.

Another shareholder who grilled the chairman quite well at this meeting and at their previous merger meeting wanted to know who the heck would vote in favour of this resolution, saying that he didn’t know how anyone could have voted in favour of this.

He even asked whether in fact the chairman had cast his votes in favour of this. Of course he hadn’t (and couldn’t), but it was a fair enough question.

The debate got a bit personal when this shareholder raised the issue of company secretary Mark Hubbard’s association with another lemon, PowerTel.

Hubbard fired up and said how he and the other PowerTel directors saved that company from total oblivion.

Director Jean-Marie Simart also got pretty terse when stating his exasperation that shareholders often associate the current DVT board with the failures of the former Davnet directors.

He gave an impassioned plea that the directors should be given some form of reward for going without remuneration for some time, including a period without directors’ professional indemnity insurance because insurance companies wouldn’t touch the company with a barge pole.

Lord got so flustered with all the questioning on the executive option scheme that he inadvertently skipped the next agenda item before being alerted by the ASA’s Edwards!

The other shareholder who tag-teamed with Edwards also probed the company on its ambitious growth targets.

Lord said the company was now meeting them on a monthly basis, and applied the extrapolator to say that the company was now where they said they’d be, but a few months and the leveler comes into play with devastating effect.

The shareholder suggested that the company should be eagerly reporting this good news to shareholders, but he had heard nothing.

Given that some of these resolutions caused so much angst among shareholders, it is surprising that the proxies were overwhelmingly in favour of them. The resolution which attracted the most opposition was that to award options to Hubbard.

He had some 42.5 million voted against him and about 169 million shares excluded from calculations, but still that only worked out to a “no” vote of only about 6% or so.

Presumably, it was a case of shareholders who just couldn’t be bothered with the company any more and trusted the new leadership to turn it around, or it may have been a hangover from the days of the company awarding shares and options to its directors and executives like it was going out of fashion.

The little guy shareholder who actually shelled out their hard earned for the now almost worthless shares (currently trading at about 3.5 cents) doesn’t seem to have much of a say in the future of this company.

Peter Fray

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