Just when we thought a little bit of sanity was returning to the executive pay debate and Pacific Brands, along comes Peter Costello on last night’s Q&A with yet another cheap shot kicking a company now on its death bed.
Has anyone thought about the 30,000-plus Pacific Brands shareholders in this situation? The company’s market capitalisation has plunged from $1.2 billion last September to just $80 million today with the stock at 15c.
Whilst the 1800 workers who have lost their jobs are dominating the media coverage, who is speaking up for the shareholders? When the stock was still trading above $2 last August, the major shareholders were as follows:
CommBank : 11.11%
452 Capital : 9.61%
IOOF : 8.03%
AXA : 7.52%
Franklin Resources : 5.2%
DFA Group : 5.2%
The Commonwealth Bank has a massive conflict as Australia’s biggest fund manager and lender and this Pacific Brands situation is a classic case in point.
While not for a moment suggesting the hard boys in the credit department gave the fund managers the tips to sell, this sale of 5.93 million shares at more than $2 a pop last September does not look good.
The unions, media and politicians like Peter Costello can make cheap shots about sackings, executive bonuses and government subsidies, but the harsh reality of the situation is that Pacific Brands was effectively at the mercy of its bankers after the sharpest contraction in economic activity since the Great Depression.
The banking syndicate attempting to secure their $810 million exposure include the Big Four and HSBC, so this is not a case of zombie foreign banks fleeing. Therefore, we should be having more of a debate about the Australian banking cartel showing mercy to its major ASX-listed customers.
The most ominous sign came when former Westpac CFO Pat Handley suddenly quit as the long-serving PacBrands chairman on November 27, just a few weeks after dominating all of the debate at the AGM as if he was the CEO.
While the board could have handled the job losses more adeptly, what we have seen over the past week is the greatest destruction of brand equity since James Hardie’s attempted asbestos dodge.
All that money spent on Pat Rafter and Sarah Murdoch is now wasted, but the media, politicians and unions have contributed to this destruction given the iconic brands involved.
The Herald Sun really kicked off the onslaught against CEO Sue Morphet with this splash last Thursday, which was rightly rebutted in The Weekend Australian’s editorial. Even the Herald Sun‘s own Terry McCrann had an indirect go at his paper with this column referring to Morphet being “outrageously and unfairly hunted by the media”.
Yes, Terry, by your colleagues. Morphet has dropped more than $500,000 on her PacBrands shares and that $1.82 million salary figure in the 2007-08 annual report is inflated by equity components. The contrast with Rupert Murdoch’s $30 million gross package last year is stark indeed.
Whilst the unions are attempting to inflict as much brand damage as possible, they seem to forget that their members are dropping a bundle through industry fund investments in Pacific Brands.
The Australian union movement has two enormous conflicts. The first is the hold it has over Australian Labor governments and the second is its significant power over $1 trillion in superannuation.
In the case of Pacific Brands, the industrial wing of the union movement has prevailed over the equity manager side but there are no real winners in this sorry saga.