KEY POINTS:
Small shareholders in two of the country's most popular companies turned the heat on directors yesterday.
In Auckland, SkyCity's board faced a motion of censure from the first shareholder to take the floor. At Contact Energy's Christchurch meeting the battle over independent directors - one of whom was described as "not proper" to hold the role - forced the top table on to defence.
Between them the companies have more than 100,000 small shareholders.
SkyCity has been criticised for its handling of under-performing assets, a leadership vacuum and most recently its decision to put itself on the block - buried in a notice about profit redistribution.
At yesterday's meeting shareholder Paul Wah told the crowd of more than 600 he had come all the way from Wellington to put his motion to the directors because he felt so concerned about the way the business had been handled.
"There has been a breakdown in the governance of this company," he said.
"There has been dereliction on the part of this board over the performance of the previous chief executive and his wife and it appears to me this board has governed for a former chief executive and his wife rather than having governed for the benefit of shareholders."
The statement received loud applause and Wah put a motion asking shareholders to censure the board for failing to govern on behalf of its shareholders.
Chairman Rod McGeoch tried to deflect the vote on to himself and asked that it be considered as part of his re-election vote.
But Wah said he would not be satisfied unless it was put as a separate issue.
McGeoch admitted he had consulted lawyers before the meeting and been advised he did not have to put a confidence motion out to shareholders but decided to take the leap perhaps knowing it was unlikely to receive unanimous support.
He told the meeting the past couple of years had not been easy.
"You just need to look at the performance of [Australian gaming company] Tabcorp - boards are under pressure. This was an easy business to make money in when we started but no business can keep making 14 per cent per year," he said.
McGeoch was forced to remind shareholders that former chief executive Evan Davies and his estranged wife Heather Shotter had not been married to each other when either began working for SkyCity. It would have been unfair to ask Shotter, who had been the longer employee, to leave after she married Davies, he said.
"So we took another way and decided to change the governance.We crafted our own set of rules around that relationship. Everybody understood that it was not ideal but we made the judgment to be fair."
The motion was delayed as other shareholders also took the opportunity to question the board. One asked why Davies had never been publicly challenged by the board over his management strategies but was told by McGeoch that his decisions had been questioned in board meetings.
Another accused the board of wanting to get rid of the company's problems by selling up rather than trying to resolve them.
"You seem hell-bent on getting rid of the cinema assets. If shareholders wanted to get out of this problem they would have sold their shares. Is there any compensation for the directors in the event the business is sold and the directors lose their positions?"
McGeoch said there would be no windfall for the directors and the board was not "hell-bent" on selling anything. "We like the Adelaide business. The cinemas we leave to one side. This is not a fire sale. We are not hell-bent on selling this company."
McGeoch said there was a lot of money in the hands of private equity looking for investments and reminded shareholders that SkyCity had not sought the initial approach.
"Our job is to maximise shareholder value and we have to engage these people to find out what it is they are really proposing."
But when an analyst stood up to request specific figures on the gaming tables McGeoch bit the bullet and put the motion forward. Those for appeared to dominate one side of the room and would have numbered about 100.
But it was defeated by those against without a close count needing to be taken.
Meanwhile, Contact took its meeting to Christchurch for the first time in the company's history, where directors were forced to again confront a long-running source of aggravation - the company's independent directors.
Although their role in twice pushing the sale of the company still rankles, it was the decision by the company to put up director Tim Saunders for re-election that gave the meeting extra spice. Chairman Grant King was forced into a detailed defence of the board's backing of Saunders, the former chairman of failed carpet-maker Feltex.
Two weeks ago a Securities Commission report blasted Feltex for failing to make material disclosures about its banking arrangements in the months leading up to its collapse.
Shareholders Association Canterbury branch chairman Alan Best asked King how independent "our so-called independent directors" were when Origin held a 51.4 per cent stake in Contact and effectively controlled who was nominated and appointed.
King said there was "no doubt in our minds" that the independent directors were "qualified".
He said it was "quite right" to say Origin's shareholding would determine the voting outcome, but that was true for the election of any independent director.
With the support of many among the 250 shareholders, Best told the meeting his association held proxies for 219,000 shares against Saunders' re-election, compared with 9516 supporting him. "It's very clear that our members, for various reasons, do not consider Mr Saunders to be a proper independent director of this company," Best said.
He referred to the commission report and said it was important for association members to know if the board had considered that issue in nominating Saunders.
King said the board considered the matter again at its last meeting on Thursday "in light of most recent information" and saw no reason to change its view that Saunders had made a "very good contribution to the ongoing governance and supervision of the company".
Other directors considered Saunders' performance "has been unaffected by circumstances". "There is no reason for us to believe that Tim won't continue to make a perfectly acceptable contribution."
The independent directors again came under fire from the floor for not adequately representing minority shareholders' interests during Origin's aborted bid early last year to merge with Contact.
A defiant deputy chairman and independent director Phil Pryke hit back yesterday, saying he had "absolutely no regrets" over his support for exploring the deal.
Analysis since had shown about $500 million in extra wealth for shareholders was "left on the table". "When these sort of proposals come up we have an obligation to put it before the shareholders and have an obligation to express a view."
- additional reporting: NZPA
Serious SkyCity offer should be known by Christmas
SkyCity shareholders should know by Christmas whether there is a serious offer on the table for the casino, cinema and hotel business.
Chairman Rod McGeogh told yesterday's annual general meeting that both parties have now started their due diligence and he expects to "have more clarity regarding their intentions by the end of November".
McGeogh said any credible proposal would then be taken to shareholders for a vote. Despite mentioning private equity several times during the meeting he refused to confirm whether both parties or either one is a private equity group.
McGeogh said the board was still making approaches to other groups which it thought might be interested but at this stage there did not appear to be any others who looked likely to move into the due diligence process.
"Some other people have, it's too strong to say expressed interest, but nothing more has come out to indicate there will be further due diligence."
Meanwhile, the board will plough ahead with the sale of its cinema assets although any sale of the Adelaide casino has been put on hold pending the outcome of the takeover approaches. McGeogh told shareholders the board had come to the view that the cinemas would be run better by someone else.
"They will be better off in someone else's hands. But only at the right price," he said.
The board expects to have indicative offers for the cinema business on the table as early as next week with final offers due to be made within two weeks.
A shortlist of three has also been reached for the position of chief executive which was vacated in June when Evan Davies stepped down. McGeogh said, subject to the takeover process, the board hoped to make an appointment by Christmas. Until then acting CEO Elmar Toime will continue in the position.
