Long-term Boral shareholders would have viewed yesterday’s profit downgrade with the same emotions as Amy Winehouse’s drug counselor reading about the singer’s latest indiscretions — unsurprised woe.

The materials maker, one of Australia’s most disappointing companies in recent decades, yesterday announced a further 40% drop in earnings to $120 million for fiscal 2009 (down from $248 million the previous year). Boral blamed the dour forecast on the collapsing US housing market, with CEO Rod Pearse claiming the company “anticipate[s] further significant reductions in sales and production volumes in the June half, particularly in bricks (where June half production may be around 50% lower than in the December half), but also in Boral’s roof tiles and USA construction materials businesses.”

While Boral is not responsible for the US economic crisis, its shareholders appear to have suffered a great deal more than its executives. Six years ago, Boral shares were trading at $4.29 per share — yesterday, Boral closed at $3.45 — a drop of almost 20%, despite the company benefiting in recent years from a higher Australian dollar and until 2007, a US building boom (admittedly, Boral has paid $1.89 in dividends during the period).

Since 2000, Boral has been led by Pearse, who, despite Boral’s insipid recent performance, has been remunerated like the messiah. So much so that last year Boral shareholders voted down the company’s non-binding remuneration report.

Notwithstanding a 17% decrease in earnings per share, Boral directors saw fit last year to pay Pearse an increased fixed salary (of $2.53 million) and a short-term bonus payment of $2.2 million (up from $576,000 the previous year). In all, Pearse received $6.67 million, a pay rise of 59%. In trying to explain their largesse, Boral directors noted that:

“Mr Pearse’s 2008 STI is higher than in 2007 due to a market review of his remuneration (as a result of which target STI was increased from 60% to 100% of base remuneration) and the Company’s stronger financial performance against target.”

Few words must cause shareholders as much dread as the phrase, “market review” (Issac Newton’s theories certainly don’t hold true in the executive suite — indeed, Crikey cannot recall even one instance in which an executive’s salary was reviewed downwards). As for Boral’s apparent “stronger financial performance”, that was conveniently left unexplained. Presumably, it did not relate to the company’s return-on-equity (which fell from 15.7% in 2004 to only 8.5% in 2008), net profit (down 19%) or its market capitalisation (down by more than 21%).

Despite the extraordinary rebuke from shareholders (more than 58% voted against the report), the Boral directors who frittered away shareholder funds on an incompetent executive team continue to happily stroll Australia’s boardrooms with gay abandon. Boral’s board includes luminaries such as Ken Moss and Bob Every. Moss’ resume includes a lengthy period as a director of GPT, which has lost billions in an over-leveraged joint venture with BNB as well as being a director of NAB (and sitting on the company’s audit committee) during the bank’s forex debacle.

Every was recently appointment Chairman of Wesfarmers, having joined the once respected conglomerate in 2006 in time to sign-off on the company’s multi-billion dollar fiasco at Coles. Last year, Wesfarmers also had the dubious honour of having their remuneration report rejected.

If Australian company directors had a shred of accountability, Moss and Every would never so much as smell another boardroom lunch. Fortunately for them, accountability is a dirty word amongst the directors’ club.

In a touch of irony, Boral’s 2008 Annual Review noted that “currently in his ninth year of leading the Company, Rod [Pearse] continues to demonstrate Boral’s Values of leadership, respect, focus, performance and persistence, which have underpinned Boral’s strong and effective workplace culture.”

Presumably, the company wasn’t referring to its financial performance.

Peter Fray

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