KEY POINTS:
When should tall poppies be given a good lopping?
That issue is still gaining traction among NZX shareholders five days after the exchange board tried to give Mark Weldon's gold-plated CEO share scheme a hasty burial.
Weldon's champions - who include some of New Zealand's more influential commentators - believe the stock exchange is lucky to have an executive of his calibre to drive its strategic development.
Weldon's aura was given a good burnishing by local reporters who had him high on the pedestal before he had even taken up his CEO's reins.
He had come back to New Zealand to make a difference after some years in New York working for McKinsey - part of the Knowledge Wave-inspired patriotism.
And he's certainly done quite a bit since the NZ Stock Exchange was demutualised in favour of the NZX, which listed in June 2003.
But an appraisal report into the jettisoned share scheme showed that Weldon was already being paid megabucks compared to other NZ executives.
Higbee Schaffler pointed out that NZ CEOs of financial services companies were paid packages worth around $646,750 - for those in the upper quartile surveyed - compared to Weldon's existing package of $900,000.
That was more equivalent to the $900,000 packages earned by chief executives of companies that were mid-sized on market capitalisation.
But - and this is a big but - such CEOs were responsible for companies with average annual revenues of $583 million and average profits of $57 million - "significantly higher", said the consultants, than the NZX's draft 2006 financial year results of $22 million revenue and $9 million profit.
The share scheme would have delivered him $500,000 in value each year over the three-year vesting period if the NZX shareholders' returns averaged 10.5 per cent a year on a compounding basis.
The argument Weldon's fans run is: Why shouldn't the NZX stump up an effective pay rate of $1.5 million a year - by tabling a sweetheart share deal - if that's what it takes to keep him here when the guy could be earning megabucks running a bigger company in a bigger commercial pond?
Or if he'd simply returned to New York to work again for the global management consultant gods and walk his dog around Central Park.
The rationale, of course, is completely loopy.
A bit like saying the Government would have been happy to pay Jack Welch $100 million (we are talking a business rock star here) to come down to NZ and run Mighty River Power.
What is clear is that even before the furore erupted over the scheme, major NZX shareholders such as Fisher Funds' Warren Couillault, who oversees a 9.7 per cent stake, were having behind-the-scenes talks to try to get Weldon's package brought more into line with NZ market rates.
Some shareholders believe the NZX directors' fees are too high for what one described as "basically a club".
But the issue that united the rebellious shareholders was the notion that Weldon could emerge with nearly 10 per cent of the NZX within just three years.
From the sidelines the dispute has, at times, seemed comical. Couillault has apparently had journalists question him about his own remuneration scheme. Fisher Funds is a private company.
GPG's Tony Gibbs has certainly been in the gun as well. But in his case, the GPG options take a considerable time to vest. Gibbs says he does not get paid a bonus every year.
But the debate that needs to be heard is one about performance.
The NZX's own historical performance - based on Datastream-sourced figures - indicates it has posted a comparative total return since June 2004 of 127 per cent. This is less than half of the peer-group average of 294 per cent.
The ASX, for instance, posted a return of 216 per cent. The London Stock Exchange posted 260 per cent.
When the NZX listed, its IPO prospectus did not contain financial forecasts and there was only limited broker coverage.
In the past two years the NZX has posted a total return of 108 per cent - ranking it number 13 of 15 companies analysed, which included the NYSE (387 per cent), Philippine Stock Exchange (355), Hong Kong Exchanges (330), Bursa Malaysia (328), Singapore Exchange (258), Euronext (245), Deutsche Boerse (197), Chicago Mercantile Exchange (187), London Stock Exchange (185), Nasdaq Stock Market (171), Australian Stock Exchange (129), ICAP Plc (110) the OMX (79) and International Securities (78).
One of the reasons some other exchanges have performed better is that they have been involved in merger and acquisition activity.
The NZX has not benefited from this due to its 10 per cent shareholding cap.
This is at the crux of arguments which Gibbs and others favour - to lift the cap. The issue may get some play at Friday's AGM in Wellington.
But the NZX board and its CEO are unlikely to move unless the tall poppies are truly lopped.
