Blowtorch on Tower chiefs

By PAULA OLIVER

Tower's bosses got a grilling yesterday from small shareholders who were determined not to let last year's financial woes go unnoticed.

The company's annual meeting in Wellington had been expected to be a lively event, with a contentious directors' fee increase and a cheap share option offer on the agenda.

All the disputed issues eventually passed votes with huge majorities - but it was Tower's chairman who delivered the line that everybody present wanted to hear: the company's troublesome Australian wing had returned to profitability.

The Australian arm had been a big contributor to Tower's loss of almost $150 million last year and $75 million the year before.

An obviously relieved Olaf O'Duill, the chairman, yesterday told a different story.

"In the first quarter of the current financial year, I am pleased to advise a profit in line with our budget, and most particularly, a return to profitability for Tower Australia."

O'Duill, who thanked shareholders for sticking with the company through a "character-building" period, said that Tower's remedial process was half way through and progressing satisfactorily.

He would not give an indication of when a dividend might next be paid, saying he did not want to give any predictions that could leave people disappointed.

The predominantly grey-haired shareholders showed that they had long memories when it came time to consider O'Duill's re-election to the board and an increase in total directors' fees to $900,000.

"If shareholders have to wait for a dividend, shouldn't directors have to wait for a pay rise?" fired one man.

O'Duill replied that market rates had to be paid to get good people on to the board. The stress and high workload of Tower's directors were not adequately covered by the existing fees, he said.

"We certainly don't sit at board meetings and say, 'How can we screw small shareholders'."

When O'Duill sought re-election to the board it was suggested by one attendee that he should be voted off because he had been on the board when the company struck trouble.

O'Duill defended himself by pointing out that two-thirds of the board had already gone.

"You have to have some continuity. In my view the decimation of a whole board is not smart. You have to have some corporate memory."

He said he was experienced in remedial situations, knew what to do, and was doing it.

O'Duill and fellow director Susie Staley were eventually re-elected with hefty margins, and the fee increase was passed.

Shareholders' long memories also came to the fore when a plan to offer chief executive Keith Taylor 1.5 million new share options at an issue price of $1.39 was on the table.

The plan, which drew criticism from the Shareholders Association during the past week, raised the issue of Taylor's pay package.

Taylor receives a base salary of $750,000.

He can earn a bonus of up to 60 per cent of that, $450,000, by meeting undisclosed performance targets.

Shareholders expressed concern that the option price of $1.39 was just 2c above what Tower shares traded at yesterday - potentially giving him a windfall further down the track.

"There's no performance aspect to this. You might do it later when the performance is proven, but why do it now?" asked Ross Dillon of the Shareholders Association.

Another man at the back of the meeting put it into his own context: "One year's pay for Taylor is what I've earned in 30 years."

Taylor twisted uncomfortably in his chair as the argument wore on, but O'Duill fiercely defended the offer.

"Mr Taylor is not a greedy person. His base salary is modest by industry standards."

Taylor's options offer was eventually passed by 87 per cent of votes to 13 per cent.