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Incentive schemes overdone

By Campbell McIlroy

Friday 4th August 2000

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Institutional investor Axa New Zealand is taking issue with claims by Mainfreight that institutions failed to do their homework on its employee share purchase scheme which was accepted despite objections at its annual meeting last week.

Axa chief investment officer Barry Lindsay said the company was supportive of employee share schemes, if appropriately structured, and acknowledged the benefit to shareholders from the likely extra commitment of employees who were owners of the business as well.

But diluting existing shareholders' interests as a result of unnecessarily generous employee share issue terms was not something Axa and other institutions could support, he said.

Last Thursday proxy votes from institutions owning five million shares (approximately 7% of the shares on issue) voted against the resolution at Mainfreight's annual meeting.

In particular, Mr Lindsay said the company questioned the need to offer shares to employees at 30% discount, funded by interest-free loans.

The 2% of capital to be issued in this instance was on top of the 4.2% of the company's capital which had already been issued on favoured terms within the past five years.

Mr Lindsay said Axa had suggested to Mainfreight a smaller discount be applied to the proposed share issue.

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