Monday 01 August 2016 05:14 PM
UPDATE: NZ Shareholders Association wants to reduce Robinson influence on Rakon
(Adds Rakon response in 10th par, share price close in the 11th par)
By Tina Morrison & Edwin Mitson
Aug. 1 (BusinessDesk) - The New Zealand Shareholders Association wants to reduce the influence of Rakon's founding Robinson family on the listed high-tech components manufacturer, to improve its performance.
The association will oppose the re-election of executive director Darren Robinson, son of the company's founder Warren Robinson, at the company'sSept. 16 annual meeting and plans to write to all shareholders seeking proxy support for the move, NZSA chair John Hawkins said in a statement. The association also wants director Warren Robinson to voluntarily stand down and suggested the company needed someone with "a stronger and more realistic commercial focus" than his son, current managing director Brent Robinson.
Rakon sold shares to the public in an initial public offering a decade ago, and the founding Robinson family retains a stake of about 23 percent and holds three of six board seats. In the past five years the company has produced four annual losses totalling $113 million and one profit of $3.2 million.
Hawkins said shareholders were "fed up" with the Robinson family having "a dominant board role".
"We think this undue influence is holding back necessary change," Hawkins said. "We find it very difficult to understand how the executive in charge of sales could be properly held to account when he sits as a director, as well as being the brother of the managing director and son of a third director."
Hawkins noted that two independent directors had resigned after relatively short tenures, and said the company needed to rapidly move to obtain another two independents.
He said the "final straw" for many shareholders was the decision to increase the pay of Brent and Darren Robinson by about 23 percent in the last year, even though the company had promised at its 2012 annual meeting to freeze director and executive pay until it had achieved earnings before interest, tax, depreciation and amortisation of $25 million.
The association has talked with Rakon chair Bryan Mogridge about its concerns.
"We expect to see him outline a strategy that is in the best interests of all shareholders, rather than the Robinsons," Hawkins said. "If he can do so, we will consider supporting him while changes are made, but it is inevitable that the board in a year or two will need to be very different to the current one."
In a statement released this afternoon, Mogridge said the company noted the comments made by the Shareholders Association, "We share their frustration with recent results and remain fully committed to expanding and diversifying the business, in line with the strategies approved by the board and in the interests of all shareholders. He added that "we regularly engage with our shareholder base on a range of issues, including governance and company structure, and value their perspective."
Rakon shares closed unchanged at 22.5 cents and have fallen 26.2 percent since the start of the year.