Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Contact Plan To Abolish Board Retirement Payments

16 December 2003

Contact Energy Plan To Abolish Board Retirement Payments

Contact Energy today announced a proposal to abolish retirement benefits to directors and alter directors’ remuneration so payments better align the interests of shareholders and directors.

The proposal, to be voted on at the company’s annual meeting next year, has been developed in consultation with Contact shareholders. It has been endorsed by the New Zealand Shareholders’ Association.

Contact chairman Phil Pryke said the proposal responded to calls by shareholders for a closer alignment of the interests of directors and shareholders.

The proposal provides for:
- An increase in director remuneration to bring payments into line with similar Australasian companies.
- A restructuring of directors’ payments so that around half of independent directors’ post tax remuneration is paid in the form of restricted shares.
- An abolition of future entitlements to retirement benefits for directors.

Under the proposal, directors’ (non-Edison Mission Energy affiliated) base remuneration would increase from the current $45,000 to $60,000 in fees and $30,000 in restricted shares. The Chair would receive $120,000 in fees and $60,000 in restricted shares, up from the current $80,000.

Directors will need to meet their tax liability from the cash component of their remuneration. Accordingly, the after-tax cash component of fees would be largely unchanged, with most of the increase taking the form of restricted shares.

Mr Pryke said the Board recognised that the changes represented a substantial increase in remuneration, however, the Board was confident that the increase was warranted.

An opinion from the international advisory firm, John V. Egan Associates, had determined that remuneration of Contact directors was well below the market norm applying in New Zealand and Australia for similar local companies. Egan Associates had actually recommended a higher level of fees than that proposed.

Further, Contact was one of the strongest performing listed companies in New Zealand.

“For every $1.00 invested at the time of Contact’s listing in 1999, an investor who consistently reinvested all dividends would today have $2.00 in pre-tax terms – a return of more than 100 per cent in less than five years,” said Mr Pryke.

“Strong leadership has been a key factor in Contact’s success and the proposed level of remuneration is necessary to ensure Contact continues to attract high calibre directors with the capability to lead the company successfully.”


Egan Associates had reviewed the proposal and concluded that the remuneration level was appropriate. It said the introduction of a restricted shares component was in line with international standards and regional best practice.

Mr Pryke said the proposal to close off entitlements to future retirement benefits for directors had been refined after feedback from the New Zealand Shareholders’ Association.

“The Association had raised this issue previously so we were keen to gain their views. As a result of that discussion, we refined the proposal to ensure that entitlements to retirement fees were closed off on a once-and-for-all basis,” said Mr Pryke.

Given that three of Contact’s directors had more than 20 years of combined service, the Board determined it would be unfair to simply abolish retirement allowances without recognising this service.

Accordingly, it has proposed that their service to 30 September 2003 be recognised in a lump sum payment which would be used to purchase Contact Energy shares that would be held by a trustee until the directors retire. In this way, the value of the allowance for past service is directly linked to the fortunes of the Company between now and the retirement of the directors.

The five Contact directors who do not qualify for retirement payments oversaw the determination of proposed entitlements, which are lower than the potential maximum level.

These directors have recommended that the following amounts be allocated for the purchase of restricted shares: Chairman Phil Pryke $141,197, Director John Milne $84,453 and Director Tim Saunders $68,403. Additional sums have been proposed to cover the directors’ tax liabilities for these payments.

The New Zealand Shareholders’ Association has said the proposal balances directors’ reasonable expectations with the benefits to shareholders of removing future entitlements to retirement payments.

The Association also observed that the Contact directors had historically been underpaid, while the company had relatively over-performed.

“I know the subject of directors’ remuneration is always a thorny subject but we believe the extensive consultation with our shareholder base means we have developed a proposal that is fair and reasonable,” Mr Pryke said.

“I look forward to discussing the matter further with shareholders at our annual meeting in Dunedin in February.”

ENDS

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

ScoopPro: Helping The Education Sector Get More Out Of Scoop

The ScoopPro professional license includes a suite of useful information tools for professional users of Scoop including some specifically for those in the education sector to make your Scoop experience better. More>>

Big Tax Bill Due: Destiny Church Charities Deregistered

The independent Charities Registration Board has decided to remove Destiny International Trust and Te Hahi o Nga Matamua Holdings Limited from the Charities Register on 20 December 2017 because of the charities’ persistent failure to meet their annual return obligations. More>>

57 Million Users' Data: Uber Breach "Utterly Preventatable"

Cybersecurity leader Centrify says the Uber data breach of 57 million customer and driver records - which the ride-hailing company hid for more than a year - was “utterly preventable”. More>>

Scoop 3.0: How You Can Help Scoop’s Evolution

We have big plans for 2018 as we look to expand our public interest journalism coverage, upgrade our publishing infrastructure and offer even more valuable business tools to commercial users of Scoop. More>>

Having A Cow? Dairy Product Prices Slide For Fourth Straight Auction

Dairy product prices fell at the Global Dairy Trade auction, retreating for the fourth straight auction amid signs of increased production... Whole milk powder fell 2.7 percent to US$2,778 a tonne. More>>

ALSO:

Statistics: Butter At Record $5.67/Block; High Vegetable Prices

Rising dairy prices have pushed food prices up 2.7 percent in the year to October 2017, Stats NZ said today. This followed a 3.0 percent increase in the year to September 2017. More>>

ALSO:

Science: New Research Finds Herbicides Cause Antibiotic Resistance

New University of Canterbury research confirms that the active ingredients of the commonly used herbicides, RoundUp, Kamba and 2,4-D (glyphosate, dicamba and 2,4-D, respectively), each alone cause antibiotic resistance at concentrations well below label application rates. More>>

ALSO:

 
 
 
 
 
 
 
 
  • Bill Bennett on Tech