By Peter V O'Brien
Friday 19th September 2003
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It has been known for some time that senior Tranz Rail executives had arranged cosy golden handshakes if their employment contracts were subject to termination.
Confirmation of the point emphasised the nonsense that has gone on for years with the connivance of company boards.
The Institute of Directors would probably, and naturally, disagree with that view, given its longstanding mantra that members are self-sacrificing, underpaid members of the business nobility.
Tranz Rail is only one example of situations where people who could be sacked for obvious incompetence, as shown in their companies' operational and financial performance, can walk with handsome retirement incomes.
And they often have sufficient belief in their personal merits to apply for and get other highly paid jobs instead of retreating to the countryside and growing carrots.
The tragedy is that company boards accept some supposed injustices in job applicants' pervious experience and appoint the demonstrably incompetent to new million dollar-plus responsibilities.
Anyone who loses a job through no fault of his own, due to economic developments or problems in his industry, is usually entitled to redundancy payments. Fair enough, but they were rarely able to negotiate massive golden handshakes when they got the job.
There is no reason for companies allowing executive appointees to receive a couple of years' base salary upon dismissal.
The argument that such deals are necessary to attract people of "international calibre" against optional employers is spurious for two reasons.
People of "international calibre" should have no need for golden handshakes, assuming they can add value to companies and do not attract irrational dislike from boards.
Any irrational dislike is an argument against the appointment of lowly qualified people to boards.
Anyone who goes into a top executive, million dollar-plus job in New Zealand has usually scanned the market. His choice of an application to a position here rarely has anything to do with playing off one international group against another.
There is an urgent need for companies in the US, the UK, Australia, New Zealand and other developed countries to refuse golden handshake employment contracts.
Such action is in the interests of the companies and their shareholders, because recompensing people for incompetence is a cost against corporate value growth.
The Tranz Rail cause was ironic, since Australia's Toll Holdings soon to control the local rail company has golden handshake provisions in some executive contracts.
Fletcher Forests' agreement to sell its forests and land to US company Campbell Group was another example of corporate weirdness.
New Zealand companies had valuable forest assets for decades, going back to the 1920s and 1930s when there were substantial plantings of radiata and, later, other pine species.
The major forestry plantations will be in overseas ownership if the Fletcher Forests deal gets the necessary approvals, given the US International Paper control of Carter Holt Harvey.
Fletcher Forests' arrangement with Campbell needs Overseas Investment Commission approval but it seems that body will approve any land or asset sale if there is some short-term benefit to New Zealand owners.
The country has sold priceless natural resources that can be regenerated without whimpers from apparent watchdogs.
Shareholders in the companies involved seem in favour of the deals, again probably because of shortsighted assessment of personal gains as opposed to long-term investment growth.
The question of shareholder involvement in companies raises the issue of the Shareholders Association's activities, particularly the antics of chairman Bruce Sheppard. He is a media darling, because the outlets want ephemeral "action," and indulges in the nonsense of wearing Viking helmets and appearing at company meetings with four-coloured hair.
Mr Sheppard can be advised that his activities will soon pall even among "mum and dad" shareholders unless he reorganises the organisation's approach, its quest for publicity from a sensation-orientated and corporate-ignorant daily media and improves his appearance.
Trimming the hair and straggly beard would help, Mr Sheppard.
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