Westfield AGM (2002)
Details
Company: Westfield Holdings Limited
Type: Annual General Meeting
Date: 13 November 2002
Chairman: Frank Lowy (executive)
CEO: Stephen Lowy and Peter Lowy
Pre-AGM
This was my first corporate AGM, and Frank Lowy is scary chairman if you annoy him (and disagreeing with him seems to do that pretty easily). Neil Woolrich (see below for his report) from Crikey (now an ABC journalist) and Giles Edwards from the ASA were also there and they asked most of the questions. It took a lot confidence for me to put my hand up in the air to ask a question.
Questions and Voting
Me: I don’t see anything in the executive remunerations package that links the bonuses to the industry or market shareholder returns. It doesn’t make sense to reward someone for increasing profit when everyone else is making bigger profits nor is it fair to punish someone who sees a fall in profit if it fell at a slower pace than everyone else. Would the board consider linking the executive bonuses to the shareholder returns of an ASX index?
Frank Lowy: The options package is designed so that the exercise price is always at a 10% premium to the share price when they are issued, so executives need to grow the company before they make any money on their options.
Neil Woolrich and the Giles Edwards both supported my question and did not accept Frank Lowys rationalle, but I got no further than his response. Neil Woolrich even included my question in his report when he said (sarcastically):
There's no point in repeating them all here because I was so patently wrong, as was the shareholder who stupidly backed up my assertion that there were no realistic performance hurdles on executive options.
Frank put this punter in his place by saying that they're issued at a premium to market price - that's the hurdle.
So there!
Voting: I voted against Fred Hilmer for re-election as director. He is a CEO, a full time position and he missed 3 out of the 11 board meetings. Lowy said that Hilmer was sick (or something else, that it was a fair reason is all I remember) for 1-2 meetings, but that meant that he still missed 1-2 meetings.
Post-AGM
I got to talk a bit to Neil Woolrich, he said I asked a good question. I told him that this was my first AGM and he said that as far as chairmen go, you can't go past Frank Lowy, if you can get through him you can get through anyone.
Westfield has a massive amount of corporate governance failings. Standard textbook concepts that are taught in every university corporate governance course. Perhaps the best way to understand this is to read Neil Woolrich's AGM report for Crikey, which appeared in the 13 November 2002 daily newsletter. It's a large report, so I've included it as a comment to this post (click on comments to read it).
However, Westfield has also been one of the best performing companies on the ASX with consistent shareholder returns of 20-40% over the medium term for the past 40 years. In fact, $10,000 invested in 1960, with all dividends reinvested, would be worth over $100 million today! So I guess a lot of people are willing to overlook some "minor" imperfections.
posted by Bambul Shakibaei @ 10:31 pm
1 comments
1 Comments:
CRULLERS V CRANKY FRANK LOWY
By Neal Woolrich
Westfield Proxy Holder
Westfield chairman Frank Lowy confirmed his reputation as one of Australia's crankiest AGM chairmen this morning in Sydney.
In the red corner was Cranky Frank, closing fast on Big Kerry as Australia's richest man, and in the blue corner was Crikey's very own little Crullers, work-from-home bum with nary a cracker to his name.
Crullers was first up to the mike come question time - a pleasant change from last year when not a sole dared ask a question of Cranky - and it didn't take long for the chairman's angry pills to kick in.
In fact, it was straight after Crullers' first question, when he abruptly asked Crullers to sit down!
Anyone who has seen Crullers in action knows that he is a most timorous sole at AGMs and today was no exception, where first of all I cautiously raised the spectre of Westfield's "astro-turfing" activities. I mentioned the previous embarrassing example from 2000 and read out the chairman's apology from the time:
"We have been guilty of a lack of transparency and openness and that is a matter of great regret and embarrassment to the company.
"Westfield values the good name it has built up over more than 40 years and is distressed at its failure to meet the high ethical standards expected of the company.
"I as chairman, and the company generally, apologise for what has happened. Steps have been taken to ensure that activities of this nature do not occur again."
I then noted that this had seemingly happened again, with a green group reportedly set up in Sacramento to oppose a rival development.
Cranky opened with a few jabs about Crikey's reputation for lack of accuracy and that my question was no exception today. Frank denied it and said my facts were all wrong, but I said I was just going by what had been reported in the Financial Review and perhaps Westfield deputy chairman and Fairfax CEO Fred Hilmer might want to throw his weight around there to make sure that the record is corrected.
Sorry folks, we can't provide a link to support Crullers' outrageous assertion, but if anyone wants to fork out the $2.20 to access the article in the Fairfax archives, it was published on 23 April this year and was titled "Westfield funds green group to fight rival in US".
Just to prove that Crullers isn't completely whistling Dixie, the teaser in the Fairfax archives says:
"The political puppeteering of Frank Lowy's Westfield is back in the news, emerging in America in the form of an overt plot to stop a rival developer from building a shopping centre near one of Westfield's own in California."
Anyway, Frank says I'm wrong, wrong, wrong, so we'll have to take that as gospel and trust that Fred Hilmer will have the record corrected down there at Fairfax.
Not satisfied with being pummeled about the noggin, I got the microphone back and raised the issue of the $80,000 that, according to evidence in the Cole Royal Commission, was reportedly paid by Westfield to the CFMEU.
Frank claimed sub judice on this one and said the company had co-operated fully with the Royal Commission.
I then raised the issue of the controversial development at Helensvale on the Gold Coast, where Westfield paid a $70,000 defamation settlement to a Gold Coast Greens councillor who changed his tune from being against every development on the Gold Coast to supporting the Westfield development. I asked that the company re-assure us that they hadn't rolled over in the defo matter and had defended it to the hilt.
Again, Crullers was wrong, wrong, wrong, and there was no cause for suspicion about it at all.
The fact that the local state member of parliament devoted about half of his maiden speech to singing the praises of the development - which had attracted the ire of numerous residents - was just a happy coincidence.
As was the fact that the Queensland state government wrested development control from the local council only last month to get the project to proceed after 7 years of wrangling.
Finally, on the matter of these questionable payments, I raised the matter of the consultancy fees to Lord Levy. Frank firmly rebutted (does he rebut in any other manner?) my assertion that there was a lack of openness and transparency on this one.
Again, Fred Hilmer needs to get on the blower, this time to the crew at the Silly Morning Hilmer, who ran this yarn suggesting that Westfield was anything but open and transparent about the Lord Levy deal:
http://www.smh.com.au/articles/2002/04/14/1018333454097.html
This article seems to suggest that it took a while for the true amount of the consultancy fee to emerge, so given that I was wrong, wrong, wrong on this one, Fred needs to put on his steel-capped butt kicking shoes and make some changes down there at the Herald.
And if anyone dare suggest that Lord Levy was hired for his political connections, watch out! He is a man of outstanding property development credentials. The SMH article is just oozing with them.
Frank was losing patience with Crullers' questioning by this stage - and he wasn't afraid to say it either - so we moved on to corporate governance.
Frank expressed frustration that because we conduct our AGMs democratically, sometimes we have to tolerate the views of people like yours truly who just get up and complain at AGMs, get their facts wrong, and have nothing constructive to say about the company.
Sorry Frank - I'll bring the pom-poms and cheerleader outfit next year.
I respectfully added that seeing it was a democracy and I was a duly appointed proxy holder, I'm within my rights to ask questions and Cranky is within his rights to say I'm wrong.
Crikey readers will no doubt recall the review conducted by Westfield's external auditors, Ernst & Young, which concluded that Westfield's corporate governance practices ranked at the "high end of the Australian corporate governance spectrum".
I found this a little confusing, because those scurrilous muck-rakers at the University of Newcastle, who spend all their days studying corporate governance but still obviously know nothing about it, only awarded Westfield 2 stars out of 5 on corporate governance.
Moreover, they rated Westfield 214th out of 250 listed public companies.
I raised this only as a means of giving the chairman the opportunity to put these pencil-necked geeks in their place, which he duly did.
Perhaps the most amusing part of the meeting came when I suggested there were 10 points on corporate governance where the company wasn't up to best practice.
The first one was that they have an executive chairman and Cranky scoffed at whether I expected him to resign.
No, but an independent chairman would be best practice.
After each of the next nine, Frank howled "you are wrong" as soon as the words had passed the bloodied and bruised Crullers lips!
There's no point in repeating them all here because I was so patently wrong, as was the shareholder who stupidly backed up my assertion that there were no realistic performance hurdles on executive options.
Frank put this punter in his place by saying that they're issued at a premium to market price - that's the hurdle.
So there!
Finally, I asked about political donations - what the company's policy was, why couldn't we get a disclosure in the annual report, and why not ditch them altogether like Lend Lease has done in accordance with best practice corporate governance?
Crullers should have realised the stupidity of this question before asking it, but luckily Cranky Frank was on hand to point it how dumb I was.
You see, Frank had discussed this at length in last year's chairman's address, so obviously if stupid muck-rakers like Crullers did their homework and actually checked last year's chairman's address, we'd know all about it.
Of course, if you're just a lazy, lazy half-baked hack like your Crikey correspondent who only looks to the current year's annual report for these things, then you don't deserve to know, do you?!
After 15 minutes of questioning from yours truly, I sat down and suggested that I'd let other shareholders take their turn as there would surely be a few more.
Cranky again took the opportunity to scoff at your correspondent, wondering how I knew this would be so.
Luckily, in a pleasant change from last year, there were several shareholders up on their feet, most congratulating the company for getting on with business and not worrying about my trivial concerns.
But a few green activists were concerned about developments at Bondi Junction, which, if you read the Sunday Tele gossip pages regularly, you'll know is going to be the greatest thing since sliced bread for the long suffering residents of that cesspool that is Bondi Junction.
The ASA's Giles Edwards asked a few questions on the accounts and despite being far less antagonistic than the rabble rouser from "crikey.com", as Frank erroneously referred to it at every mention (tisk, tisk, tisk), still got a serve from Cranky Frank.
Most of Frank's venom was directed at another questioner - gee, I wonder who that could be - but Edwards respectfully asked that the chairman save those comments for when that other much maligned questioner had the floor.
My advice to Edwards is to not fraternise with Crikey correspondents before AGMs and sit more than 2 seats away from them.
After about a vigourous and robust 40-minute discussion on the accounts, we got to the re-election of directors, first up being Fiery Freddy Hilmer.
Giles Edwards won the toss and got to kick with the breeze, raising his opposition to having the CEO of another company on the board, as that other job is surely a full time gig.
Cranky said he was more than happy with the contribution Hilmer was making and he was satisfied that Hilmer "fulfills all of his commitments" to Westfield.
Edwards then raised the matter of Freddy only making 8 out of 11 board meetings and 6 out of 7 committee meetings - how could this possibly be fulfilling his commitments?!
Frank again said this was wrong - he recalled that Fred only missed one meeting.
Hang on, Cranky! It says in the accounts that he missed three board meeting - which Edwards duly pointed out.
But who needs accounts - Frank stuck to his guns and insisted that Fred only missed one meeting.
I got up and agreed with Edwards' comments and said that attending only 8 of 11 meetings was unsatisfactory for an ordinary board member, let alone the deputy chairman.
But before I could finish, Cranky was down my throat again saying that I couldn't read and hadn't listened to him - Freddy only missed one meeting!
I then pointed out that the chairman signed the accounts, as did the external auditor, which said that Fred had missed 3 meetings - I politely suggested that the chairman might want to read the accounts a little more carefully next timebefore he signs them off.
Cranky was not happy!
Never one to hold a grudge though, I thought the only noble thing to do was to get up during the last item of business - the re-election of the legendary, always right, never cantankerous, thoroughly civilised chairman, Frank Lowy - and try to do some hatchet burying.
I proudly announced that, despite having some "minor differences of opinion" with the chairman on a few matters, I was in favour of his re-election and would be "whole-heartedly" casting my 1,100 proxy votes in his favour and urged all other shareholders to do the same!
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