Once again our man Crullers has incited a typically colourful spray from retail king Gerry Harvey against his old mate Alan Fels.
The share price has taken a hammering lately, falling over 40% since September, but as far as the profit and loss is concerned, the company is in pretty fair health.
But Gerry does not hold back in handing out the colourful quotes at his AGM – something which he identified as being a product of the freedom to speak one’s mind that goes with being the major shareholder and executive chairman.
Gerry did his usual bit of racing through the formal proceedings – mostly mumbling the millions of proxies that had been received for each resolution – to the mirth of those in the meeting.
I got up for a few boring questions on the accounts, then queried their corporate governance performance.
I reminded him that those “pencil-necked geeks” at the Uni of Newcastle had rated Harvey Norman a lowly one star out of five and pointed out all of the company’s corporate governance shortcomings. A lack of independent directors, an executive chairman, the chairman of the audit committee being the senior partner in Harvey Norman’s legal advisors of more than 20 years and an increase in non-audit fees despite the reverse being de rigueur.
In a stark contrast to certain other chairmen who fly off the handle when challenged on corporate governance, Gerry took these observations in the constructive manner in which they were intended. But his argument was basically that if he listened to all these “experts” on governance – “university students who have never run a business” – then he wouldn’t be able to run his business. If there was a simple way of doing things, he would do it.
He put his trust his faith in the integrity and ability of the people on the board and he has the results to show for it.
That’s all very well, but the obvious retort is that that puts complete reliance on the people running the show. There are no processes in place to protect in the case of, say, a rogue director.
What if, say, the chairman of the audit committee wasn’t of impeccable character and approved supply contracts to his mates on favourable terms? There are no checks and balances in place.
Still, Gerry Harvey has an enviable track record to fall back on, so it is hard to criticise his judgment of character.
After the mundane questions, I threw Gerry a question that I knew would get him going, asking how the ACCC investigation was going and whether he’d be pleased to see the end of Felsy’s reign.
Would he what!
Gerry said he “hates the man with a passion” and that he “can’t wait to see the back of him”.
Gerry was chock full of anecdotes of other MDs and CEOs who had been persecuted by Fels. “I said to one bloke I’ll hold him down while you stick pins in him!”
Gerry said he was privileged to be able to speak out because his was essentially a family company – one other CEO had encouraged Gerry to “get stuck into the bastard (Fels) – I can’t say a thing”.
He bemoaned the waste of an extra $20 million thrown to Felsy in the latest Federal budget and that “Fels employs more solicitors than anyone else”.
He described the ACCC’s interrogation tactics as being like Nazi Germany. In the Harvey Norman case, their executives had to face a room of 9 ACCC people staring them down and a top silk quite literally inches from their face accusing them of all sorts of chicanery.
Gerry noted that one senior (female) Harvey Norman executive was reduced to tears in the interrogation (and for a few days afterwards) and left the company soon after.
On calls for more disclosure in the accounts, Gerry said “you’ll read all this stuff and say, ‘what a load of crap’!” He said that there were things in the cash flow statement that not even he could understand.
Unlike most cautious business leaders these days, Gerry wasn’t afraid to admit his fondness for options, saying that he would issue more to two of the directors, “and a few for myself”, he mumbled.
At times he was a little freewheeling in describing the domestic banter between he and Katie Page, saying that they’d get home, go to bed, talk business, and then first thing in the morning “she’d be at it again”. We assume he meant more business talk.
At one point in the meeting he described how he would take responsibility for his mistakes and at times Katie would have a go at him. When one shareholder asked what mistakes prompted Katie to have a go at him, Gerry quipped “I don’t have to do anything for Katie to have a go at me!”
What other chairman bares their soul – and home life – like this at an AGM?
As he did last year, Gerry took a few swipes at former Coles Myer CEO Dennis Eck, noting his generous share and option packages and that he’s still on $800,000 a year despite being “probably the worst CEO in Coles Myer’s history”.
When musing to himself about what to do about the plethora of dishonest businessmen who keep cropping up, he said that prospective directors should “do an exam” for honesty and if they fail, then “flog ’em”.
During the course of the meeting, the class clown come chairman was continually frustrated by the necessity to count the show of hands. Towards the end of the meeting he asked who had seen the new Auburn store in Sydney’s west and said “now this is worth counting”!
Gerry gave a detailed run-down on the bait advertising case the ACCC has pursued against the company and he certainly got shareholders on side with his side of the story. He was pretty even-handed about it as well, saying that he just wanted to sit down with someone independent, he’d put his side, the ACCC put their side and then he’d cop punishment if it was deserved.
While it was easy to be sympathetic to Harvey Norman based on Gerry’s description of the facts, the other side of the argument is that the ACCC will have hell to pay if they don’t enforce the law vigourously. APRA, anyone?
It may be the case that they have been unfairly harsh on Harvey Norman, and others for that matter, but no doubt there will be someone out there claiming “persecution” when clearly the ACCC has every reason to go in boots and all.
Describing the new Slovenia store, Gerry noted how he’d met the president of the country who had said what a nice store they have – “we’re celebrities in Slovenia”!
What, and you’re not at home, Gerry?!
Gerry finished the meeting as he’d conducted much of it – with an amusing disregard for the formalities.
“I’d better close the meeting – where’s the piece of paper that tells me how to do that?”