Contact's smaller shareholders heckle and boo over fees

Thursday 23rd October 2008

Contact Energy's minority shareholders' pleas for directors to "do the right thing" and at least delay their intention to double the pool for directors' fees fell on deaf ears at utility's annual meeting in Auckland today.

Amid cries of "shame", Contact chairman Grant King, also CEO of Contact's 51.4% majority owner, Origin Energy, allowed shareholders almost two hours to debate the controversial Resolution 4, but made it clear that Origin's deciding vote would support the resolution.

King changed the meeting order to take the fees issue first, followed by resolutions to re-elect deputy chairman, Phil Pryke, and fellow independent director, John Milne. Many shareholders then left the meeting, missing a profit warning from King and a presentation by chief executive David Baldwin.

All three resolutions were lost unanimously in a non-binding show of hands at the meeting but will be carried by Origin's vote. Shareholders ignored King's defence that he wanted to double the fee pool to $1.5 million to allow the company to increase the number of directors.

The fees proposal may also be a sign that succession planning is under way for Pryke, Milne and Tim Saunders, who have all served on the Contact board since its creation in 1996.

That didn't wash with shareholder Richard Forbes, who told the meeting: "What amazes me is that you don't damn well need it. If you only need 25% of it, why not have a resolution that deals with 25%," he said. "It makes no sense to say 'we don't need this, but we do need it'."

The fees plan earned the ire of Prime Minister Helen Clark and opposition leader John Key this week. The government has previously said it may consider a ministerial inquiry into Contact's prices after it raised prices for some customers by 10%.

The company's shares fell 3.6% to NZ$7.05 today and have dropped 10% this year.

At the meeting today, a shareholder named McLeod appealed twice for King to "do the right thing" and either to withdraw the motion to raise fees, or vote his Origin proxies against the motion.

"Do the right thing, Grant," he said. "That's all we ask you to do. You won't lose face if you do it . . . but if you don't, you will have to live with yourself and you won't be the man you are today.

Contact AGM's have often been fiery affairs, but this one set a new benchmark for the antipathy between Contact shareholders - generally well-rewarded by their company's performance - and the Contact board, especially Pryke, whose voice shook with emotion as he defended his performance against accusations that Contact was "an easy business to run."

"Over the last 14 years, Contact has emerged, culminating as the NZX's Number One stock, with consistent performance over time. It doesn't happen by accident, Bruce," he said, directing comment to the chairman of the NZ Shareholders Association, Bruce Sheppard, who had earlier invited Pryke to quit.

Only John Milne brought levity to proceedings, apparently agreeing with Bruce Sheppard that his current fees were adequate recompense before realising his mistake and adding: "but only for last year".

By Jonathan Underhill

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