Director fee increases have been the hottest issue at recent annual meetings.

Individual shareholders have argued strongly that it is inappropriate to have large increases in a recessionary environment but most companies have adopted a hard line, they believe their directors are underpaid and higher fees are needed to attract quality board members.

The highlights of recent meetings have been the hard-headedness of Contact Energy chairman Grant King; the claim by fellow director Tim Saunders that he was underpaid when he received $128,150 for attending just 24 meetings; the deadly silence after one shareholder asked the Hellaby board why directors who approved the BBQ Factory purchase and the company’s disastrous dividend policy should be entitled to a fee increase; and the criticism of Contact Energy by SkyCity chairman Rod McGeoch.

Contact Energy would be lucky to score a D in Public Relations 101.

The company has consistently annoyed individual shareholders over corporate governance issues, it announced a 10-12 per cent electricity price increase in Wellington and parts of the South Island just weeks before the upcoming general election and proposed a 95 per cent rise in the directors’ fee pool in a recession.

The only concession King would make at the recent annual meeting was to move Resolution 4, which covered the directors’ fee increase, to the top of the agenda.

King argued that Contact Energy directors were underpaid compared with similar-sized Australasian companies and the proposed fee increase would put it in line with Telecom and Fletcher Building.

He also said that the full $1.5 million pool would not be used in the June 2009 year.

Sixteen shareholders spoke against the issue and many of them were clapped and cheered. Amongst the issues raised were;
* Why wasn’t the fee increase limited to a more acceptable 25 per cent?
* Contact Energy was a less demanding company than Telecom and Fletcher Building because the telco operates in a highly competitive industry while the building group has major offshore operations
* Directors of the three government-owned power companies – Genesis Energy, Meridian Energy and Mighty River Power – are paid far less.
* Why doesn’t the company wait until economic conditions have stabilised?
* Mercer’s independent report was poor.
* How will Contact Energy’s workers and customers respond to this huge increase?
* Higher fees make directors less independent as they become more dependent on companies.

King and Saunders didn’t give an inch. The chairman said he had thought hard about the issue and the hike in director fees “was in the best long-term interest of Contact Energy”.

Saunders, the former chairman of failed Feltex, said yes when asked by Bruce Sheppard whether he was underpaid. Saunders would also struggle in Public Relations 101 as the least he could have said was “Yes, but I think it is important that we all share the pain in these difficult times and any fee increase should be deferred until economic conditions improve”.

The motion was defeated on a show of hands but was carried after 79 per cent voted in favour in a poll vote. Only 24 million votes were cast in favour, when Origin Energy’s controlling votes are excluded, while 84.1 million shares were against.

Minority shareholders voted overwhelmingly against the motion because they are fed up with the continual re-election of Phil Pryke, Tim Saunders and John Milne to the board and any fee increases will go to these three unwanted directors.

This discontent is reflected in the huge reduction in the number of shareholders from over 210,000 after the 1999 IPO to 84,000 now. In addition Pryke and Milne would not have been re-elected at this meeting without the support of Origin Energy and Saunders would have been defeated last year without the same backing.

If King takes such a heavy-handed approach towards his fellow shareholders then how does he treat his customers and employees? The cynic would probably argue that he is trying to drive down Contact Energy’s share price in order to make a low-ball offer that shareholders will accept out of total frustration.

New Zealand Oil & Gas Chairman Tony Radford told shareholders on Wednesday that he was not going to jump up and down over the 76 per cent director fee hike proposal. He said the result was for shareholders to decide.

Radford rushed through the agenda and only one shareholder spoke on the fee increase motion. The shareholder congratulated the company for the substantial profit and dividend payment but said he would vote against a fee increase because the financial crisis had impacted on the company’s share price and he had lost money this year.

The fee increase was approved after a poll vote with 70.5 million shares cast in favour, 30 million against and 9 million abstained.

Shareholders approved the fee rise because NZOG performed extremely well in the June 2008 year and the board has to be fully motivated to decide how best to invest the company’s $286 million of cash.

Hellaby shareholders were in a grumpier mood when they met in Auckland on Thursday.

Chairman Bill Falconer said that the timing of the fee increase was not ideal but the company’s directors were underpaid and a report by Sheffield supported the proposal.

The Sheffield analysis was rubbished by shareholders as was the timing of the increase. However the resolution was approved by a show of hands after Falconer announced that Hugh Green’s 30.7 per cent stake could not be voted, there were 5.6 million proxies in support, 1.6 million against and only 1.5 million additional shares in the room.

These figures illustrate the important role of the big institutional investor, particularly ACC which has shares in most NZX-listed companies.

ACC effectively decided the Hellaby outcome because if it had voted its 2.3 million shares against the motion, then the fee increase would probably have been defeated.

SkyCity’s annual meeting was extremely positive with chairman Rod McGeoch and chief executive Nigel Morrison heaping praise on retiring directors, newly appoint directors and the recently appointed senior management team.

The only critical comment from the chair was that Contact Energy directors received additional large payments for work associated with merger and acquisition proposals whereas SkyCity directors did not.

McGeoch explained that the fee increase was mainly required to facilitate the appointment of an additional director.

Only one shareholder spoke against the fee increase because it was the second-last item on a long agenda and by that stage most shareholders were tired, hungry and thirsty.

Vector was the only company to make the correct call when it pulled its proposed 22 per cent fee increase and chairman Michael Stiassny told the annual meeting: “In the context of the local and global economic conditions, with your shares being impacted by the market decline, New Zealanders losing their jobs, seeing equity in their homes erode and wondering how to make ends meet, your directors could not have their blinkers on and ignore what is going on around us.”

Stiassny’s comments were right on the mark.

Director fee increases – Greed or well deserved?


NZX value

Base fee*

Pool fee increase




Contact Energy



$770,000 to $1,500,000


70 minutes





$810,000 to $990,000



NZ Oil & Gas



$340,000 to $600,000


5 minutes





$250,000 to $375,000


24 minutes

Show of hands




$750,000 to $950,000


8 minutes


*Base directors fee before annual meeting proposals