KEY POINTS:
Three of Vector's independent directors delivered an ultimatum to the Auckland power lines company's chairman Michael Stiassny - it's you or us.
Stiassny held his ground, so Tony Gibbs, Greg Muir and John Goulter - three of New Zealand's most respected businessmen - walked yesterday and publicly declared their lack of confidence in Stiassny, also one of the country's most experienced and well-regarded commercial minds.
A highly unusual statement to the stock exchange said: "[The independent directors] regret this action, but advise they have ongoing concerns with the governance of the company and the chairman."
Amid investor disbelief at such a remarkable falling-out, Vector's shares plunged. At one point more than $200 million was wiped from its sharemarket value. However, the shares recovered, ending the day down 8 cents at $2.45.
Few investors would comment publicly, but they agreed the departures indicated serious problems.
The Business Herald understands the blow-up follows long-simmering tensions in the boardroom.
Well-placed sources say the three were concerned Stiassny was too closely linked to Vector's 75.1 per cent shareholder the Auckland Energy Consumer Trust, which administers shares on behalf of power users in Auckland, Manukau and Papakura.
They are also said to believe Stiassny acted outside strategies agreed by management and the board.
The most recent example is said to have followed the Commerce Commission's threat this year to impose price controls. The commission alleged Vector had been abusing its monopoly and overcharging some customers. Vector and the commission eventually reached a draft settlement. But the directors were dismayed to find that during negotiations Stiassny and the trust met commission chair Paula Rebstock to resolve the dilemma.
Sources say Gibbs, Goulter and Muir believed this arrangement went outside the agreed strategy.
In another case they were disappointed that Goulter was replaced as chairman of the risk and assurance committee by trust representative Karen Sherry. This committee oversees the firm's relationship with the Commerce Commission.
They also argued Stiassny's management style was too confrontational.
The directors are cagey but Muir told the Business Herald: "His aggressive style led to people not being as successful and effective as they could have been. His leadership is inconsistent with the values held by the independent directors."
Muir said he was unhappy about relationships with the trust and trustees. "We have concerns over the behaviour of some of the trustees and their relationship with the board, we have concerns about skill-set gaps on the board, [there's] very little electricity experience, very little gas experience, or accounting experience," Muir said. "John, Tony and I have sought to work with Michael on his leadership of our board and today was the culmination of us being unsuccessful."
Gibbs, a long-time and close associate of Stiassny, was disappointed the relationship had broken down. "It is the most unhappy board I have been on in 20 years. I am disappointed a long-term relationship has come to this, but I could not put up with this nonsense any longer."
Stiassny was unapologetic about the relationship with the trust.
"They own a fair stake of this company and there is a lot at stake. As chairman I think it is my responsibility to manage the shareholder relationships. I have done that."
He said it was the prerogative of the chairman and the trust to engage with the commission. That relationship with the regulator had improved thanks to his, the trust's and the rest of the firm's efforts.
"I can categorically say ... that no decision or outcome has been reached that was not dealt with appropriately inside the governance chain vis a vis management and the board. Was there dialogue on numerous levels? Yes there was, that is what happens."
Stiassny added: "I am a very black and white character. I can be very hard, clear and precise. I am very big on outcomes. I did not see it as the most unhappy board in 20 years. The majority of the board is still here, they seem quite happy."
In a separate statement, Vector said it remained confident it will deliver financial performance within the range of market estimates. The remaining Vector directors, Bob Thomson, Shale Chambers and Karen Sherry, also backed Stiassny.
YOU GO...
Michael Stiassny, Vector chairman
A chartered accountant and senior partner of Ferrier Hodgson & Co in Auckland. Also chairman of Metrowater and a director of other public and private companies including the Horticulture & Food Research Institute of New Zealand Ltd.
OR WE GO
John Goulter, independent director
Former managing director of Auckland International Airport. He is currently chairman of the New Zealand Lotteries Commission and of United Carriers Group Ltd. He is also a director of the Reserve Bank of New Zealand and Television New Zealand and an external adviser to ABN Amro New Zealand.
Tony Gibbs, independent director
Chairman of Turners & Growers Ltd and Staveley Incorporated. He is also a director of Coats Plc, Coats Holdings, Guinness Peat Group and Tower. He has served on the boards of companies such as AGB McNair, Tyndall Life NZ, Tenon, Wrightson, ENZA, Turners Auctions and Tyndall Australia.
Greg Muir, independent director
Executive chairman of Pumpkin Patch, a director of the South Auckland Health Foundation and of the Auckland Rugby Union. He is also chairman of Hanover Group, the Blues Super 12 franchise and a member of the Eden Park board of control. He was formerly CEO of The Warehouse Group Ltd.
