A big corporate governance story unfolded at the AGM of emerging mining
company Oxiana Minerals yesterday but, amazingly, not a word of it
appeared in either The Age or the Herald Sun this morning.

And it wasn’t as if hundreds of people didn’t know about it. When
Oxiana chairman Barry Cusack revealed that the company – which has
performed better than any other over the last five years – received a
staggering 46% (it was actually 46.9%) against vote on its remuneration report, I started
jumping up and down and demanded to know what the issue was.

What followed was some of the most outrageous obfuscation I’ve ever
seen at an AGM. Cusack claimed to not know but the meeting was told the protest was led by the emerging corporate governance
kingmaker, Institutional Shareholder Services, which advised its
clients to vote against the remuneration report.

As The Australian‘s Andrew Trounson reported today, Cusack
said the message “hasn’t been consistent” and then
cited “hurdle rates (for option grants), retirement benefits, length of
time measuring performance” as having been “mentioned in discussions”.

John Durie was diplomatic in The AFR’s lead Chanticleer item
today as he cited the possibility of “a conspiracy or a stuff-up”
because the issues are cut and dried. The Oxiana board has quite outrageously changed the performance
period of some options issued to managing director Owen Hegarty so that rather than lapsing they are in the money.

The 2004 report said the performance period expired on 30 June 2005
and, based on this, some of Hegarty’s six million options would have
lapsed. Lo and behold,
the 2005 annual report changed this to December 2005, meaning the
hurdle was met and Hegarty is about $2.7 million richer. You just can’t
change the rules like that on something which requires shareholder

Oxiana refused to clarify the situation or make a public statement
explaining the change, so its major shareholders such as Barclays had
little choice but to follow the advice of ISS and vote against the remuneration report.

Hegarty also
owns 27 million shares worth $91 million at yesterday’s record close
when the company reached its goal of cracking the top 50 with a market
capitalisation of $4.6 billion, so he’s hardly in need of the extra
donated equity from the other shareholders.

A separate issue related to the valuation of Hegarty’s six million
options at just $77,282. Given they have a strike price of $1.25 and
the stock closed at $3.38 yesterday, this is patently absurd and has
the effect of understating Hegarty’s pay and over-stating profit. If
ever we’ve seen an argument for fully expensing options grants, this is

Just because Oxiana is making a fortune mining gold and copper in Laos,
doesn’t mean it has to adopt the accounting standards of third world
countries. The major shareholders were absolutely right yesterday and
the board and management have emerged looked greedy and deceptive.

Let’s hope the media don’t allow the company to bunker down until the
storm passes. We need some detailed public explanations rather than the
“we’ll try to understand the issue” bluster that was offered up in
response to my questions at yesterday’s AGM.

Check out the full voting results
lodged with the ASX this morning. Interestingly, the issue of another two
million options for Hegarty was only opposed by 13.2% of the directed