The lunch club continues at Alumina
By Stephen Mayne, Alumina shareholder Alumina’s annual report was released on Friday and it seems corporate Australia’s cosiest and most expensive lunch club continues to prosper. For those who don’t know, Alumina is what’s called a postbox company. It doesn’t actually do anything because its only asset is a passive 40% stake in a global […]
Alumina's annual report was released on Friday and it seems corporate Australia's cosiest and most expensive lunch club continues to prosper. For those who don't know, Alumina is what's called a postbox company. It doesn't actually do anything because its only asset is a passive 40% stake in a global aluminium and bauxite joint venture, AWAC, which is run out of Pittsburg by Alcoa of America.
Alumina chairman Don Morley admitted at the 2003 AGM that the AWAC joint venture only cost $3.5 million to run when it was part of WMC but this had blown out to $8 million after Alumina demerged with WMC in 2002.
Part of this blow-out is because an overpaid board of mining has-beens are milking the company. The old Melbourne mining network has recyled tired old directors such as Mark "Pasminco, Mayne, Homeside" Rayner and retrenched BHP veteran Ron McNeilly. They are supported by long-standing WMC lawyer and Melbourne Club type Peter Hay and chairman Don Morley, who was WMC's finance director for almost 20 years.
In its first year Alumina's non-executive directors fetched $85,000 a year whilst chairman Morley pocketed $212,500. This rose to $92,000 and $231,000 in 2004 and then the NEDs got a tasty rise to $120,000 in 2005.
The board at least held off on any pay rise for 18 months but then this appeared on page 35 of the 2004 annual report: "It was determined not to grant fee increases during 2004. A total of $509,575 was paid in non-executive director fees in 2004 before the effect of the previous WMC Stock Appreciation Plan. The board did, however, commission an independent expert review of non-executive director remuneration, and taking into account their advice approved an increase in non-executive director fees of $25,000 per annum effective 1 January 2005."
Crikey again attacked the board at last year's AGM and asked why on earth they met 20 times in 2004? Sounds like the old boys network is running a fortnightly lunch club.
This year the full board only met 13 times but the four non-executive directors sit on all the committees and it just so happened that the audit committee met nine times, the compensation committee seven times and the nomination committee three times. Why would the nomination committee meet when no fresh faces were added to board. It sounds like the boardroom lunch club is still gathering for a fortnightly catch-up paid for by the Alumina shareholders.
Sure, Alumina shares are up from $6 to $7.30 over the past year and the company is now capitalised at $8.5 billion, but that is entirely due to booming global demand and the management out of Pittsburg.
Australia's mining industry used to be run out of Melbourne but the collective incompetence of the cosy club largely squandered the dowry. Seeing some of these discredited dinosaurs in their late 60s hanging on to this Alumina rort does no-one any credit. It's time for the shareholders to act by voting down the remuneration report and giving chairman Morley a serious re-election scare at the AGM on April 27 in Melbourne.