Gerry Harvey is 80. He’s also not well. Just watch the billionaire Harvey Norman founder and executive chairman in this unhinged 18-minute interview with Elysse Morgan on ABC TV’s The Business last night.
After presiding over an unprecedented two-hour insult-fest at yesterday’s extraordinary Harvey Norman AGM in Sydney, it is time for the other nine directors to take control of the situation. Surely yesterday is the last public company AGM Gerry will be allowed to chair.
I’ve written to the ASX this morning requesting that it requires Harvey Norman to lodge a full transcript of proceedings on their platform so that independent investors can gain more insight into the character and style of the person running $2 billion of their money — not to mention assess the numerous market-sensitive statements Gerry made during the meeting.
Attention is now going to turn to what needs to happen to fix this situation.
If Harvey Norman were to put out the following statement to the ASX, shares in the $5 billion company would instantly surge by more than 10%, creating in excess of $500 million in value for shareholders:
Governance reforms at Harvey Norman
The board of Harvey Norman today announced a series of governance, personnel and transparency reforms in response to recent concerns expressed by institutional shareholders, including the Future Fund.
Founder Gerry Harvey is retiring from the board on January 1 and will be replaced by a newly appointed independent chairman, former Macquarie Group CEO Nicholas Moore, who will lead a governance and strategic review of the business.
Harvey Norman also announced the resignation of three long serving executive directors — David Ackery, John Slack-Smith and Chris Mentis — from the board, in recognition of the 20%-plus protest vote against each of these directors on at least three occasions over the past decade.
However, each will retain their existing executive roles and will remain key members of CEO Katie Page’s core executive committee.
Three new independent female directors — Peta Credlin, Janet Albrechtsen, and Judith Sloan — have been appointed to the board with immediate effect meaning that Harvey Norman will, for the first time, have a majority of independent directors and its first ever female non-executive directors.
Each of these new directors has ties to News Corporation which is the largest recipient of Harvey Norman’s $391 million annual advertising and marketing spend. The company is intending to review and renegotiate its arrangements with News Corp to ensure shareholders are receiving value for money, but it remains an important strategic partner for Harvey Norman.
Drawing on advice and feedback from ASIC’s review of Harvey Norman’s accounting policies in recent years, the board has also agreed that the half-year results to be released on February 28, will, for the first time, fully consolidate the Australian franchise operations and publicly disclose the individual valuations of the reported $3 billion property portfolio.
Additionally, given the buoyant state of the Australian property market, the company is undertaking a program of property divestments with a view to reducing the company’s $800 million-plus debt and raising funds to distribute more of the company’s $400 million-plus in accumulated franking credits in 2020.
The company has also today sold all of its listed investments, which were valued at $44 million as of June 30, for $47 million, a net gain of $3 million. The board has committed that there will be no more diversionary investments away from retail and property, such as the $75 million lost on the Shepparton dairy business in recent years.
After three capital raisings over the past five years to maintain the dividend and avoid further increases in debt, the company is expecting sufficient property sales will obviate the need for any further pro-rata capital raisings.
However, given the expected renewed interest in Harvey Norman shares from institutional investors, who have previously avoided the stock, the company is considering doing an institutional placement to raise up to $500 million once investors have fully digested the interim results in February.
Directors believe it is strongly in the interest of Harvey Norman to attract credible new institutional investors onto the register and to that end, both the Harvey and Norman families have agreed to each sell up to 5% stakes in the company as block trades into the institutional placement next March.
It is expected the combined stakes of the Harvey and Norman families will settle at around 30% after the sell down and they will be represented by three out of 10 directors moving forward in what will otherwise be a conventionally governed company with a clear majority of independent directors.