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Mar 25, 2008

As Allco burns, Sir Rod shares some pearls on the boardroom

When eight of the nine Allco plays have destroyed more than 80% of their equity value in less than a year, it is amazing that non-executive director Rod Eddington will even show his face in public, writes Stephen Mayne.

The Centre for Corporate Law and Securities Regulation held a seminar in Melbourne last week on the topic “Director’s duties: Navigating the storm on board”. Sir Rod Eddington was listed as one of the speakers, but given the Allco Finance Group implosion, I paid the $99 fully expecting Australia’s busiest professional director would be a no show.

Alas, there he was, listening closely to Bob Baxt talk about legal defences when directors get sued and then holding forth on what makes a good board with the following points:

  • Sir Rod believes in a majority of non-execs and an independent chairman;
  • The Qantas constitution shouldn’t specifically have banned former CEO James Strong from returning as chairman after a break;
  • Sarbanes-Oxley was too onerous and led to London becoming more important than New York as a business centre;
  • CEOs should take on one outside non-exec role to better understand their own boards;
  • A good board has two or three executive directors;
  • The non-execs need to keep a close eye on the relationship between the chairman and CEO;
  • Increased regulation is discouraging some business leaders from joining the NEDs club but the pool of talent remains strong.

Given that Sir Rod backed non-executive chairs I asked the obvious question about his experiences as the senior independent director under News Corp executive chairman Rupert Murdoch and former Allco Finance Group executive chairman David Coe. He didn’t answer the Allco bit, but described Rupert as the driving entrepreneurial force behind News Corp who had the capacity to pull off both positions. Listen to the audio here.

As a shareholder in Allco Finance Group, I’m still yet to receive any explanation for the huge value destruction. This was the status of my nine Allco plays as Sir Rod gave his talk last Wednesday:

Allco Finance Group: bought 100 Record Investments shares at $5.38, sold 50 at $10.65 a pop on April 26, 2006. Retain 50 worth $11.50 at 22c. Broken even.

Allco Hit: bought 227 at $2.21 on Sept 18, 2007. Down to 7.9c so losing $483.

Allco Hybrid Investment Trust: bought 9 at $60 on Jan 21, 2008. Down to $5.10 so losing $494.

Allco Max: bought 800 at 62c on Nov 20, 2007. Down to 14c so losing $384.

Allco Equity Partners: bought 130 at $3.85 and 2500 at $2. Down to $1.90 so losing $503.

Record Reality: bought 590 at 85c on Aug 15, 2007. Down to 14.5c so losing $416.

Rubicon America: bought 500 at $1 on Aug 15, 2007. Down to 11.5c so losing $442.

Rubicon Europe: bought 645 at 78c on Nov 5, 2007. Down to 12c so losing $425.

Rubicon Japan: bought 575 at 87c on Nov 5, 2007. Down to 15c so losing $414.

When eight of the nine Allco plays have destroyed more than 80% of their equity value in less than a year, it is amazing that someone like Sir Rod will even show his face in public.

Check out this video crowning Sir Rod the busiest man in corporate Australia.

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3 thoughts on “As Allco burns, Sir Rod shares some pearls on the boardroom

  1. Dr Harvey M Tarvydas

    Alas “amazing”. An intelligent general analysis of Sir Rod projects him as you and others know/identify him. Very different the strict psychological analysis wherein the “amazing” act says it all. Freaks are delicious & poison in turn. Know your stuff

  2. Tom Veidners

    Stephen – is it possible that you have used the word “alas” out of context in your article? The definition defines alas as “an exclamation to express sorrow, grief, pity, concern, or apprehension of evil”?

  3. Geoffrey Walker

    Allco was not mentioned by name but it was clearly alluded to in the answer.

    Buying all those hybrids when you did belies your reputation as good analyst, although it undoubtedly provides another axe to grind.

    Credibility is a two way street.