KEY POINTS:
It was John Goulter who threw the gauntlet down to Vector's chair Michael Stiassny at Wednesday's board meeting.
Goulter - a former chief executive of Auckland International Airport and Vector director since before the successful float of 24.9 per cent of the lines company's shares - was livid at an email Stiassny had sent to the board implying directors had been personally critical of Commerce Commission chair, Paula Rebstock.
The email indicated the trust's desire for a reminder to be given to directors to be circumspect after some nasty things had supposedly been said about Rebstock by one of them.
Goulter and fellow independents Tony Gibbs and Greg Muir - three topline commercial players - were enraged by the email, and further so by a suggestion Rebstock had asked for a meeting with Stiassny and the trust to make her displeasure known.
Goulter, who had already gained personal assurance from Rebstock that comments contained in Stiassny's email were incorrect, demanded the board record his comments.
If the board was in any doubt about Rebstock's position they only had to consider the letter she sent disavowing the slurs. Muir had also sent an email.
First of all, Goulter laid out his own credentials: honoured by Deloitte/Management Magazine as a CEO of the Year; a director of the Reserve Bank and TVNZ; a chair of the New Zealand Lotteries Commission.
Goulter and the two other directors made it clear their integrity had been impugned.
They were also upset that Stiassny had gone behind their backs by taking representatives of the major shareholder, the Auckland Energy Consumers Trust, to two secret meetings with the commission without the board's knowledge.
It was the final straw. They asked for Stiassny to step down as chair. Bob Thomson, the remaining independent, said he would support Stiassny.
Stiassny refused to step down.
The three directors immediately resigned, putting the spotlight on the dysfunctional governance of one of New Zealand's largest and most important companies.
Gibbs, who later fronted much of the trio's public comments, had taken issue with Stiassny's confrontational leadership style, which sources claim had disrupted decision-making and led to a climate of fear between the chair and CEO Mark Franklin's team.
Six months earlier Gibbs had called Stiassny to a private meeting to ask him to show some leadership, lay off the executive, stop double-guessing management or step down.
The trio was also upset at the way board meetings were run, reportedly with the minutes taken at the end rather than at the start of the meeting.
Sources suggest Franklin had taken his own issue with the chairman's style to the independent directors. But Stiassny is said to have subsequently smoothed relations with his CEO. Franklin is not talking now - saying through his PR people it is a matter for the board.
When the showdown became public, Stiassny gave as good as he got saying he was a black-and-white guy, and acknowledged his reputation for being tough.
The seeds of the final walkout have their antecedents in the July arrival of two AECT trustees - Karen Sherry and Shale Chambers - on Vector's board of directors. AECT chairman Warren Kyd had earlier reversed a prior commitment to government that while the trust remained the 100 per cent owner of Vector, there would be no trustee directors.
This was in line with recommendations in the 1998 Report of the Ministerial Inquiry into the Auckland power supply failure, which concluded it was not the best practice for elected trustees of AECT to be directors of the energy company because their conflicting duties would diminish the board's effectiveness.
As subsequent events show, the inquiry recommendation was right on the button.
Kyd maintains it was necessary to get back on the board so the trust could keep fully abreast of the company's plans, which was no longer possible because of NZX rules.
"We consulted with the Minister of Energy about the changed circumstances and the trust's view that direct representation on the Vector board was appropriate, and the Minister, David Parker, said he had no objections," Kyd said in his annual chair's review. Parker says he took advice from the Ministry of Economic Development before replying to Kyd.
In any event, Gibbs - who as a GPG director sits on boards in which his company has major stakes - could hardly object to the principle.
But when the two AECT trustees arrived, the board went "dyslexic". The distrust between the commercial directors, at least one of whom had opposed Sherry's appointment, compounded when it became clear the pair were intent on more than a watching brief.
The trust camp maintains the "testosterone-charged trio" is simply sexist as far as Sherry is concerned. "Lots of yelling" said one source.
Inquiries disclose the boardroom atmosphere further darkened after Rebstock dropped her August bombshell. The commission accused Vector of earning excess profits and subsidising the trust's beneficiaries at the expense of other consumers.
Rebstock would take control of the company if satisfactory changes could not be negotiated.
Another issue was bubbling.
The trustee directors, elected on pledges to ensure increasing dividends for their beneficiaries, were concerned at the desire of some independents to push further for privatisation.
In fact the trust wasted no time in increasing its stranglehold on Vector.
Goulter arrived at the November meeting of the Vector's risk and assurance committee to be told by Stiassny that Sherry was now in his place. The committee is probably the most important of Vector's sub-board groups. Under its terms of reference it must assist the board to perform its responsibilities identifying and managing risks which may have a significant influence on the company.
The committee also had to consider and approve recommendations of the executive's own risk management committee, and provide strategic feedback to the board on Vector's risk-management policy. It is obvious that Sherry, a trust lawyer who has not run a major company, is unqualified for such a pivotal commercial role.
Extraordinarily, Stiassny sees no conflict in Sherry's role as a trustee director who must represent the wishes of the majority shareholder while also occupying a position which gives her a standing invitation to attend meetings of the executive.
It's their right, he suggests. Chambers also chairs a board committee.
Kyd himself is astounded at the directors' walkabout which he did not see coming despite a warning by one to Sherry of the mounting concerns about Stiassny. Left in the dark by his predecessor about the pending blow-up, he could only wring his hands at the outcome.
But Sherry was reportedly quick to take Staissney's side telling the independents they had the numbers to foil the coup d'etat against the chairman.
Goulter is keeping his head down publicly. He is the appointed sole member of the appropriations review committee to look at funding entitlements for parliamentary purposes, and the amount Parliament approves to fund administrative and support services for the House and MPs. His report is pending.
Sources suggest the politicians have made it clear it would be unhelpful if he adds his criticism of the AECT members to that of his colleagues.
Also at issue is the fact that Vector's appointments committee - which used to include Gibbs, Goulter and Muir as well as Stiassny - did not have a say in board appointments.
"The dictates come straight from the trust," said Brian Leyland, another former director to get the bum's rush.
Leyland was pushed off in favour of Thomson, who is a former Transpower CEO, after two independent board reviews left him with the impression he had done well.
Apparently, Leyland had raised issues over Stiassny's operating style.
The trust's interference has been obvious since 2002, when Wayne Brown, Doug Dell and John Wells stepped down as directors with the ink hardly dry on Vector's merger with United Networks. The trust cited the resignations as due to constitutional reasons. But this does not stand up.
Subsequently, other independents were reportedly told 'if you don't signal your resignations we will not appoint you at re-election'.
Stiassny, it has been said, was the trust's messenger.
Vector's banking syndicate should be asking serious questions.
The banks were assured there would be stability of board and management when Vector went on the asset trail, taking on major debt to fuel the United Networks merger and NGC takeover. But in just two years, six independent directors have gone.
Leyland expects them to be "upset at what is happened". The assurances were not part of a formal agreement.
The board now lacks the commercial expertise to run a major infrastructural company. Ironically, despite his clear failure to maintain his board's confidence, Stiassny is the sole remaining member of Vector's appointments committee.
His decision to obey the wishes of the major shareholder rather than operate in the overall best interests of Vector must, however, be a time-limiting exercise.
