KEY POINTS:
Contact Energy today backed down on increasing directors' fees, even though it got a big increase at its annual meeting in the pool of money available to pay directors.
"There will be no increase in base fees at this time," the company announced after the market closed and
after shareholders called directors "pigs in a trough".
The company said it came to the decision after due consideration of the current economic environment.
The resolution to near-double the directors' fees pool to $1.5 million passed with 78.96 per cent in favour.
Director Phil Pryke was re-elected with 82.63 per cent in favour and John Milne returned with 84.64 per cent support.
Small shareholders expressed disgust at the increase in the pool for directors' fees from $770,000 to $1.5 million, at a time when power prices were going up 10 per cent.
Contact chairman Grant King said the company did not plan to use all of the $1.5 million straight away, but needed to have it available.
Contact was performing in the top quartile of companies listed on the New Zealand stock exchange, but was paying its directors bottom quartile prices, he said.
Contact directors were poorly paid compared to other large listed companies, and the extra money was needed if it increased the number of directors from four to six.
Prime Minister Helen Clark yesterday accused Contact's directors of greed, while National leader John Key also opposed the plan.
But Mr King told reporters after the meeting he hoped Contact would not lose customers to other energy companies, many of which pay directors a fraction of what Contact had proposed.
"I would trust that would not be the case, because I think Contact provides a tremendous offering to customers. Both in terms of competitiveness and in terms of the service the company provides, I think it's a very good offering," he said.
"The service that Contact provides customers and the tariffs that charges customers are made for completely different reasons than any resolution on fees."
Mr King said the appropriate comparison for directors' fees was not with other energy companies, but with similarly capitalised public companies such as Telecom and Fletcher Building.
However, Bruce Sheppard of the Shareholders' Association said Contact Energy was a much easier company to run than Telecom, which faced huge competition, and Fletcher Building, which operated globally.
Dressed in a Viking hat and with a devil's pitchfork in hand, Mr Sheppard invited Mr King to not exercise his directed proxy vote on majority shareholder Origin's behalf, an invitation Mr King declined.
"May God have mercy on your soul," said Mr Sheppard following the vote, and after the meeting he told NZPA the decision would cause immense damage to its business.
"Contact is a business that lives in the community. It derives its revenue from convincing people to deal with it and that is about confidence and respect," he said.
"They've lost both, so you should expect that they will lose business.
"The board will look back in a year's time and say `why is our turnover down 15 per cent and why is our profit halved?' and they'll say `could it be to do with the fact that we doubled directors' fees?"'
Mr Sheppard was particularly scathing in his condemnation of former Contact chief executive and current director Phil Pryke, who was being paid too much, he said.
Mr Pryke is an independent director but Mr Shepherd said he wasn't acting as one and claimed he hadn't made a recommendation to shareholders that wasn't in Origin's interests.
Mr King later told the meeting Contact "is not currently expecting to outperform" its 2008 full year result.
He said the reason for the forecast was higher South Island wholesale prices.
The higher prices were the result of transmission constraints.
For the year to June 2008, Contact reported a $237 million annual profit.
Mr King told shareholders the company was well positioned for future growth, despite managing some complex and ongoing issues around the transmission constraints.
Chief executive David Baldwin said the electricity market was clearly delivering new generation New Zealand needed.
"However, historic underinvestment in the country's transmission network is now preventing the lowest cost sources of electricity from reaching consumers," he said.
Contact Energy's share price was down 29c, or 3.97 per cent, to $7.02, in a market which fell 3.2 per cent.
- NZPA
