Melbourne has
long been Australia’s clubbiest business community and the development
and management of Australia’s vast mineral resources has been plotted
and planned by a group of closely associated blokes in the Collins
Street boardrooms ever since the gold rush of the 1850s.

However,
the last 12 years have seen the departure of Woodside and Alcoa to
Perth, Rio Tinto’s move to London, the merger of BHP and Billiton, the
takeover of North and WMC and the collapse of Pasminco. This has put
paid to the club, although the last remnants can be seen at Alumina
Ltd, the post box company which owns a 40% stake in AWAC – a global
aluminium and bauxite joint venture run by Alcoa out of Pittsburgh.

With
just a CEO, company secretary, one other executive and support staff,
there isn’t much to be done, yet the board insists on paying themselves
full freight, as if they were running some complex global mining
operations with thousands of staff.

I opened the batting at Thursday’s AGM by asking how the board was put together in 2001-02 and
what they actually did. Were there specific things they could point to
that Pittsburgh did or didn’t do because of the actions of its minority
Australian partner?

Chairman Don Morley said the board was put
together by WMC management. They wisely decided that the man who had
been finance director for 18 years would settle nicely into the Alumina
chair for a fee of $212,500 a year, which will rise to $287,500 in 2006
– more than the $250,000 that WMC chairman Ian Burgess got in 2002 when
he had 3,000 staff and 1,500 contractors to deal with.

As for
their role, Morley pointed to a nice move which maximised franking
credits for Australian shareholders and a related party transaction
with Alcoa that the board signed off on. Fair enough, but what about
the rest of the year?

I did my usual spray about the old
Melbourne miners club and singled out Mark Rayner, who failed miserably
as chairman of Pasminco, Mayne Nickless and NAB. Morley responded by
saying Rayner was re-elected with 95% support last year, prompting a
retort that such a low vote is the equivalent of a revolution in
Australian corporate elections.

I later tipped Morley himself
would get re-elected with between 99% and 99.5% and was spot on.
Another director, Peter Hay, managed to keep a straight face when
saying the board had done a performance review and Morley had come
through with flying colours. Yes, that would be the same Peter Hay who
was the Freehills partner most regularly used by WMC over the previous
few years.

The lads are clearly taking this board pay issue
seriously because Ron McNeilly, the former BHP Steel boss who was
retrenched three years back, got up and gave a detailed seven minute
speech in his role as chairman of Alumina’s remuneration committee. He
singled out the time commitment as one reason to justify this post box
company getting fees equivalent to an operating miner, which led into
my later questions about why on earth the board met 20 times in 2004.
The response was amazing. Apparently, the three executives get a bit
lonely and like to have their NEDs in the office for regular guidance
and advice. To do what? Tell the world’s biggest and best aluminium
company across the Pacific what to do.

All up, it was an
entertaining meeting and the response from shareholders was very
strong, although one old dear came up later and gave me a gobful for
being disrespectful. She calmed down a bit later and revealed she’d
turned 80 last week and had about 100 shares worth $7 million. Not bad
for someone who spent 43 years as a nurse.

Unfortunately, my
lobbying of the two proxy voting kingmakers, Institutional Shareholder
Services and Corporate Governance International, came to nothing
because the remuneration report was approved by more than 99% of shares
voted. However, on the floor of the meeting it was a close call and the
Australian Shareholders’ Association representative said he had proxies
that were running 4-1 against. Indeed, the little guys know what a rort
these fat board fees are.

Peter Fray

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