Shareholders Association founder Bruce Sheppard has been made an Officer of the New Zealand Order of Merit for his services to business. Photo / by Michael Craig
Shareholders Association founder Bruce Sheppard has been made an Officer of the New Zealand Order of Merit for his services to business. Photo / by Michael Craig
New Year Honours: Bruce Sheppard, Officer of the New Zealand Order of Merit for services to business.
Maverick shareholder advocate Bruce Sheppard reckons there are lessons for investors from the American Wild West.
The first pioneers usually died young and penniless while the settlers who followed in their footsteps prospered, he says. But sometimes it pays off and the 57-year-old trailblazer is still standing, on his perpetually bare feet.
Sheppard has just been made an Officer of the New Zealand Order of Merit for his services to business, most notably for founding the Shareholders Association, which has been holding company directors to account for over 15 years.
Sheppard was born in Auckland but spent much of his childhood in the Northland town Matakohe, where his family were predominantly dairy farmers.
He wasn't the greatest student, failing School Certificate but doing quite well in maths. He found his calling in accounting and successfully completed a commerce degree.
"My first job was at what is now Ernst & Young. I arrived as an A-grade student with a feeling that I was entitled to whatever I wanted. During my interview I was wearing a black singlet and gumboots, having just crawled out of the Waitemata mud where I'd been flounder fishing - which was my job in the school holidays - stinking like a polecat. The HR manager left immediately after he hired me, and probably thought "this is my gift to my employer".
"I was probably the world's worst employee on the basis that I've always been contrarian, slightly rebellious - although others would say completely rebellious."
Sheppard never wore a suit and when his employer bought him a tie, he used it as a belt. When he was made to wear shoes, he cut holes in the toes.
He resigned before he had a chance to be sacked, and started an equally tenuous stint at Deloitte.
"I was working for someone who'd just made partner and I looked at the shit he had to go through and at the people he was in partnership with and said 'why would you want to be in business with these people? Bugger this, I don't want to be a partner in a Big Four firm, it's just not me'.
"I guess that was the point of self-realisation that I just wasn't going to fit into any large organisation because I'm just too rebellious. I'll take the contrarian view, sometimes just for the hell of it."
In 1985 he founded Gilligan Sheppard Accountants with former Inland Revenue tax inspector Kevin Gilligan. Sheppard still works at the firm, above Smith & Caughey's on Queen St.
During the 80s, Sheppard occupied himself with property investment and in 1989 bought his first business, Argus Fire Protection, which he still part-owns.
The ensuing years saw him undertake a number of "completely dopey" venture capital investments.
These included taking on a company called Pacific Lithium, which sought to create lithium for batteries from sea water.
"This bloody fruit-loop scientist had worked out that lithium was the third most common element in the world, so why is it so expensive? And he found it naturally occurred in sea water so he developed this gunge to harvest the lithium from seawater.
"You would not imagine how difficult it was to get a resource consent or any consent at all to put this gunge in the Hauraki Gulf, but we eventually got it and put miles upon miles of these gungey nets out in the Firth of Thames ... and we dutifully started harvesting lithium."
The company failed to turn a profit an was ultimately turned over to 3M, which had a monopoly in the battery market.
Another of Sheppard's more bizarre ventures was with a company called Vortec Energy, which planned to build power-generating windmills as big as Auckland's Vero Centre. The plan didn't get off the ground. But there have been many successes, too, including, Kiwi Self Storage, which he co-founded, and software company Aptimize.
"In aggregate they worked - some of them were very profitable," he says.
Shareholders Association founder Bruce Sheppard. Photo / Michael Craig
"A spontaneous act of stupidity"
The story of how Sheppard came to establish the Shareholders Association is characteristically quirky.
Sheppard was one of 150,00 New Zealanders to have shares in Brierley Investments. In 1999 it was revealed the company was to move its headquarters to tax-haven Bermuda, with major implications for shareholders. Sheppard was outraged.
"I'm a bit of a history fan so I noted that they were having their AGM on November 11 at 11am, which was exactly the time World War I ended and the Germans surrendered.
"So I rocked up to the meeting with a tin hat on ... and before the meeting began I thought I'd derail them with a point of order. So I stood up and asked for two minutes silence for the First World War.
"Everyone stood and I still had the mike in my hand so I went into a long dissertation of how Brierley had caused more losses to the New Zealand economy than World War I."
Sheppard's antics caught the attention of the press, and gained him the admiration of company shareholders.
He then launched an "opportunistic" PR campaign to highlight the plight of shareholders, which led to the formation of the Shareholders Association.
"The more I looked at public companies versus private companies, I said 'how come private companies perform so much better on every metric, if they're well run, than public companies? Private companies have better margins on turnover, better returns on equity - they were just better all round.
"I came to the view that the main reason for this was that public company boards were largely dysfunctional and directors seemed to treat shareholders as if they were.
"One director actually said to me, 'once we've got your money we don't give a shit about you. You're dumb, back of the bus idiots who we will throw lollies to when you whinge'. I said 'fine. It's probably time we started whingeing'."
The association's many victories have included the abolition of directors' retirement allowances; limiting directors' fees; successfully advocating to end the practice of companies using auditors as advisers; and the defeat of the Fletcher Forests' $1.4 billion deal to buy the Central North Island Forestry Partnership - "I dressed as a lumberjack and took my grandfather's 6ft saw to that meeting".
The association also advocated financial literacy for investors and shareholders and implemented education courses, particularly for the elderly. Sheppard also led the campaign for financial market reform and accountability, particularly the Companies and Securities Act and the right to take an action on behalf of investors.
Sheppard's no-holds-barred approached has landed him in hot water more than once. In 2009 he was sued for defamation by business high-flyers Eric Watson and Mark Hotchin. The case was ultimately settled with a substantial payout.
It perhaps indicative of what sets Sheppard apart from the crowd that he considered the multimillion-dollar defamation suit "an amusing challenge".
"Amusing in so far as it was a process that I figured could be turned into fun. And given that the Shareholders Association carried professional indemnity and defamation insurance it was fun that I could have with an insurance company behind me."
Sheppard left the Shareholders Association in 2011 to take up a position with the government's Financial Markets Authority, where he remained for one term.
He is now continuing his work with Gilligan Sheppard Accountants and is involved with investments with private companies. He still goes to board meetings with no shoes on, sometimes shirtless, or wearing a pair of Viking horns - "it's a great leveller," he says.
Bruce Sheppard's advice to shareholders
• Join the Shareholders Association: "It exists to enable, protect and reward ownership. In order for you to invest you have to have knowledge. The trend is often not your friend, which is what stockbrokers will tell you it is. Your friend is identifying when an asset's cheap. You should buy when they're cheap and if they fall further, buy more, but you have to understand what you're buying."
• Favour simplicity: "I often say, if you had the choice of buying Hallenstein-Glasson, which is a simple business - sells clothes, makes money, pays dividends. Or you had the choice of buying Brierley Investments, which is a conglomerate of all sorts of stuff, which do you have a better chance of understanding?"
• Buy in your home market: "What chance do you think you've got of understanding Walmart compared with the Warehouse? You can walk into a Warehouse, see how long the queues are at the checkout, see what the stock looks like on the shelf and whether it's displayed well, and you can form a view of whether the business is operating well."
• Speak up: "Don't be afraid of calling the chairman, don't be afraid of calling the CEO. If you call a chairman, or a CEO in New Zealand they'll probably answer your call and you'll hopefully be able to have a rational discussion ."
