Tuesday 8th November 2011 2 Comments
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New Zealand Shareholders Association Corporate Liaison Director Des Hunt said today that the NZSA had engaged with Sky City at the highest level in regard to the proposal to increase their director fees.
Hunt pointed out that the increases of 25-33% are well ahead of inflation, which was around 16% since the date of the last increase in 2006.
The Sky City directors have told us they want to bring themselves up to the 50th percentile of equivalent companies he said. They also argue that they need to hire an Australian Director at Australian market rates.
Hunt pointed out that Sky City's operating performance has been flat since 2008. Revenue 803m against last year's $804m; EBIT 224.5m against last year's $221.6m.
NPAT (prior to asset sales) has increased from $108m to $123m, an apparent increase of $15m, but in fact this is due to a drop of $32m in funding costs, because they raised more capital from shareholders and sold some heavily geared assets.
The company argues their Total Return to Shareholders (TRS) is better than many, but Hunt said this ignores the fact that since 2007, the TRS has fallen. We feel that they are really comparing themselves to the greedy majority, whose fees have not moved in parallel with shareholder returns he said.
Hunt said that the Association accepted some increase was necessary, and supported providing additional funds to appoint a deputy chairperson.
It had suggested to the directors that they should take 50% this year and the balance next year, dependent on results. This would be a fairer decision to shareholders, and a better reflection of the economic conditions today, he said, adding that it would allow "improved performance'' to show through.
Hunt said that the Association would prefer companies to consider revisiting director's fees every two years to avoid large catch-ups, which are difficult for shareholders to assess.
For any company to continue to increase directors' fees ahead of the CPI without some relationship to shareholder returns is unacceptable he said.
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