Sceptics not ready to bend to board view

By PAUL PANCKHURST

It felt like a total disconnect - as if the directors and shareholders of Telecom came from distant tribes and, stumbling across one another, found only mutual incomprehension.

The cultural divide was over a simple question: in 2003, when corporate governance is more important than ever, what is enough to disqualify someone from becoming a director of New Zealand's biggest listed company?

The board lined up on the stage at the Carlton Hotel - John King, Michael Tyler, Rod McGeoch, Roderick Deane, Theresa Gattung, Paul Baines, and Patsy Reddy - unanimously backed former Bank of New Zealand chief executive Lindsay Pyne.

Most knew him from way back.

The tone of the objections from the floor was a disbelieving: "How could you?"

In the days leading up to the meeting, the manoeuvrings included conversations where Pyne and the company's chairman, Deane, tried to win over sceptics such as the Shareholders Association and fund managers Brook Asset Management and AMP Henderson Global Investors.

Simon Botherway, of Brook, fronted up yesterday clutching a copy of the whopping document that led to the Pyne controversy, the Securities Commission's report into "certain arrangements entered into by Bank of New Zealand in March 1988".

His copy wore a forest of yellow stickies.

One was on page 268 - the page that, among other things, states: "The bank published financial statements in 1990 which did not give a true and fair view of the results of the bank for the year ending 31 March 1990."

"I wonder," asked Botherway, "if I could put a question to each and every one of the directors: Have you actually read this report? Mr Baines, have you read this report?"

However, Deane - a master of cool control - cut short that stunt.

Later, the research director of the Shareholders Association, Oliver Saint, stood to eyeball the board.

"I'm looking at every single board member, because this decision has been unanimous and I cannot believe that it could have been unanimous."

He went on: "It upsets me to think that you haven't thought of the repercussions for Telecom of somebody with the stigma that BNZ unfortunately had 10 years ago.

"And I tell you. I've read this report through again and it horrifies me.

"For you to say, Mr Chairman, that there is no guilt attached. It's just not true."

Saint pleaded for Pyne to withdraw.

AMP Henderson's Paul Dyer spoke against the appointment - saying the crux was signing off the questionable accounts.

Pyne and Deane saw the Securities Commission report quite differently.

"I can assure you," said Pyne, "that this issue was thoroughly reviewed by the Securities Commission and they were quite categorical in their finding that there was no breach of fiduciary duties by the directors."

Deane said the contentious arrangements were initiated before Pyne joined the bank.

"Lindsay arranged the Bank of New Zealand's exit from the so-called 'winebox' company, European Pacific, very shortly after joining the bank. In my view, this amply confirms his wish to not engage in these types of transactions."

The commission, said Deane, "found that there had been no improper conduct and that there had been no breach of fiduciary duty".

To the sceptics, he might as well have been speaking Swahili.

After the meeting, Pyne told reporters that he had been disappointed by the controversy.

He spoke so quietly that he was sometimes inaudible.

Deane, however, told reporters that while Pyne spoke softly, he had a backbone of steel.

Pyne is due to return today to Thailand, where he works as an adviser to the president of the Bangkok Bank.