COMMENT: Hard-charging Weldon got results, but not trust

Thursday 6th October 2011

Love him or loathe him, Mark Weldon has to be given credit for reviving a New Zealand stock exchange that was on life support when he took the reins in 2002.

For his rather large legion of critics, most of whom never put their heads above the parapet to take a public crack, there is simply no evidence to suggest he was pushed rather than fell.

Granted, Weldon may not cash in much of the “over-performance” element of his long term incentive scheme, which expires in December, and has been a big part of his generous package, whose total value in the last financial year was $1,319,236.

But the fact remains he’s been in the job for a decade, which is a long time for any CEO to hang around these days, and has indicated for some time that 10 years might well be long enough.

In that time, he amassed so many NZX shares that he appeared as its largest single shareholder, depending how you count it, in the 2010 NZX annual report.

His personal holding then was 6.6%, with rights to another 1.8% held in Tane Nominees, the vehicle for his long term incentive plan shares. That made Weldon the potential beneficial owner of 8.7% of the local bourse, ahead of the next largest substantial security holders ING, at 8.6%, Fisher Funds at 7.9%, and the Accident Compensation Corporation at 7%.

His sale four months ago of two million shares to buy a property now looks like a harbinger of his preparation for departure, but it also became part of a Financial Markets Authority investigation into NZX’s disclosure practices.

Despite exoneration, the fact of the new financial markets watchdog probing the exchange operator’s chief executive was an undeniably untidy look. It was also consistent with a pattern for courting controversy which tended to overshadow the average 24% annual return for shareholders that chairman Andrew Harmos says NZX has generated on Weldon’s watch.

In part, that’s because he attacked privilege in the broking community, and hewed a path that has annoyed those who expected a public trading platform to be free with its information rather than having to pay for it. He has relentlessly pursued an expansion strategy into new markets, including market information, data sales and derivatives, which left traditional participants worried he didn’t love them enough.

He played hardball with his critics, and they crowed when he failed, as occasionally he did, on initiatives such as the new electricity futures market, snatched by the ASX, and the muddled execution of a clearinghouse services upgrade that provoked open revolt among broker members.

From Weldon’s perspective, much of this has been either tall poppy stuff, or an inevitable aspect of having to regulate market participants, who won’t always back your calls. And he can point to canny deals on the TZ-1 carbon trading platform and South African Bond Exchange, which gave the company a bumper 2008 financial year.

The milk powder derivatives play is logical, deserves to work, and starting to exhibit rising volumes.

While critics would say there are still far too few new companies turning to the NZX to float, Weldon might argue with justification that those figures reflect New Zealanders’ over-cautious attitude to risk and equities, rather than anything the NZX did or didn’t do. The slow cultivation of a savings ethos will do far more for that than a single individual ever could.

There’s also the fact that Weldon has never tried to be lovable. Prickly and hyper-competitive, Weldon oversaw high staff turnover and a corporate culture where the line between hard-driving and retributive was often crossed.

Weldon also struggled in his relations with the media and shareholder activists.

The welcome removal of some of its regulatory oversight into the new Financial Markets Authority took the sting out of that criticism, which was bugbear through the late 2000’s.

But the string of senior executives who came and went, NZX’s continuing low quality of disclosure about itself to its own information platform, and Weldon’s take-no-prisoners style all suggest NZX is as ready for a change as Weldon is.

Whoever replaces him has plenty of good stuff to work with. Here’s hoping they can succeed in engendering the trust in the local sharemarket that has for too long eluded New Zealand investors.

BusinessDesk.co.nz

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