It was a justifiably rough time for directors of property group Mirvac in Sydney yesterday, with small securityholders giving them the rounds of the kitchen over the poor performance and the move to boost directors’ fees for a second time in as many years.
The board last year upped the maximum amount to be paid to directors by $250,000 and then popped up with a new request of double that this year to an aggregate $1.95 million. It said it needed the extra money to pay new directors, two of whom came on board yesterday, but won’t seek the approval of securityholders until next year’s AGM.
That was a sneaky move by Mirvac and chairman James McKenzie. Their appointments should have been fixed ahead of the meeting and voted on yesterday. There was no reason not to do it that way. But in a year’s time Mirvac’s finances might be better, the results could be higher and shareholder angst not as heated as it was yesterday, judging from the media reports.
The board deserved the bollocking it got yesterday to lift their fees twice in the toughest years the company has faced, for itself and the industry generally, shows no understanding whatsoever of the damage done to its owners, the shareholders.
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Securityholders have seen their distributions from the company slashed, and yet the board wanted to increase the amount available to pay them.
The board argued that it needed the extra to allow for an expansion of the board, but just as income for shareholders has fallen, why couldn’t it slice directors’ fees so everyone could share in the pain.
Mirvac declared a final distribution of 0.2 cent, down from 8.23 cents in the previous year, bringing full-year distribution to eight cents, down from 32.9 cents.
There was no cut in payments for directors.
Former Suncorp-Metway boss John Mulcahy and the former Australian chief executive of Ernst & Young, James Millar, were appointed non-executive directors to the Mirvac board on Thursday, bringing to eight the number of directors.
Neither are property experts. In fact, Mulcahy left his last gig at Suncorp because the board was tired of under-performance and the rising losses on property loans in the Metway Bank that threatened the viability of the whole company.
The Metway Bank part of Suncorp has more than $16 billion of non-performing loans (mostly property) in a so-called bad bank because they are in default, delinquent or just not generating the income they should be.
Suncorp needed big capital raising, cost cuts and job losses to try and keep it afloat, especially a year ago as the credit crunch became a freeze and there were very real concerns Suncorp might not survive.
So how can Mirvac appoint someone to the board with that track record?