This is Mr Lincoln Augustus, first second cousin of Holymagimon.
Coming up to 10 pm here in Kingston and we are listening to the waves and reading the emails from the friends at the AGM.
We write this based on the feedback that we have received here in Jamaica from some of those at the Metgasco AGM.
It would be very good if the Metgasco Board somehow read and reflect upon this posting, because there may be no second chances.
A. WHAT WE FEEL MAKES UP A GOOD BOARD
A Board of a company is there to oversee the performance of the company. Directors govern companies on behalf of the shareholders who elect them.
"The company board of directors is charged with the responsibility of maintaining good corporate governance. There are important policy and performance elements to these responsibilities. The board of directors is the guardian of fairness, transparency and accountability in all of the major financial and business dealings of the company, defending the interests of investors and wider stakeholders. To fulfil this responsibility directorial boards are required to remain active, informed and competent in the supervision of the company. However company directors have more than simply a regulatory role - also they are ultimately responsible for the performance of the business, in agreeing the strategic direction of the company, appointing the chief executive, and monitoring the performance of the company."
We do not understand how a group of directors who all have a common ESSO background can be critical and objective in their appraisal of the performance or non-performance of their other ESSO background directors, and we feel that this is not a good situation. It could lead, rightfully or wrongfully, to the perception that mistakes or misdirections are not being addressed seriously because of perceived old boy networks.
It has always been our belief that Boards have to be made up of talented directors who come from different backgrounds so that board meetings can be frank and brutal, without the Damocles sword of friendship overhanging debate.
The family feel that having talented board members who all have the baggage of previous employment friendships could be problematic.
Uncle Tobias always says that middle of the road horses from the same stable do not race or compete against each other very well. The horses may have the ability to munch grass together and rub each other’s noses, but they tend to run together in a little herd in the races. So the best horse always performs at the level of the worst horse, says Uncle Tobias, and he is a very wise old man indeed.
B. HISTORY OF THE METGASCO SHARE PRICE
Now for some history of the share price on the date of the AGMs for the last 5 years
26 Nov 2009 – 48 cents 16 Nov 2010 – 56 cents 14 November 2011 – 56 cents 13 November 2012 – 19.5 cents 19 October 2013 – 14 cents
So the present Metgasco Board have been at the helm and controlling the rudder of the good ship as the share price slowly sank from 56 cents in 2011 to 14 cents today.
It could have been worse, the share price could still be at 5 cents, so now that it is at 14 cents is indeed a blessing.
What the Board may not realise is that a lot of long time shareholders are hurting. These are people who went out, day after day, and did an honest job and got paid. They then paid their taxes and were left with a little money after their day to day living expenses. They then invested that money in Metgacso, confident that the elected Board and managementwould not let them down. It is our opinion that these investors have been let down in the share performance and price.
We feel that the members of the Board have not got serious money of their own tied up in this share. They may have shares, but it is our understanding that these were not bought. It is our understanding that most of their shares were given as bonuses and incentives.
Perhaps the Board members should allay the fears of the concerned investors by going on market and buying a few shares with their own money, just to show confidence. Like perhaps $200,000 worth of shares each as a starting point, since they feel that they are doing such a good job.
So if the ship goes up, their investment goes up, and if they are at the helm when the ship sinks, then they get to suffer some of the pain with the rest of us.
We just feel that one should not be guiding a company if one does not think the company is good enough to invest your own real money in, in the first place.
So the family was confoundedly amazed when we read that the Chairman had stated at the AGM that:
“Later, in July, when the Board reviewed executive pay for the year ahead, we decided there would be no salary increases for senior staff, nor would there be any bonuses for the past year, regardless of the personal achievements of the staff.”
The family is totally flabbergasted that such a thought could have even been entertained, let alone that such a statement could be made at this AGM. We are wondering what these personal achievements are that could have merited a salary increase or a bonus.
Alvin the Idiot feels that he would easily think of a number of achievements that could possibly warrant a bonus:
1.Bringing the share price down to new lows
2.Wholesale sacking of staff
3.Encouragement to the Lock the Gate movement by retiring from Casino
4.Non progression of conventional well drilling
5.A massive cash burn with nothing added to share value
C. HOW THE VOTING WENT AND THE IMPLICATIONS OF THIS
From the feedback that we have received, it appears that the present Board and management were very happy at the way the voting went. They have no cause to be.
1. THE REMUNERATION REPORT
"If a company receives two strikes - a vote of 25 per cent or more against its remuneration report two years in a row - a vote on a board spill is triggered."
This year, there were 131 million votes against and 117 million votes for the Remuneration Report. That means that a total of 52.8 per cent of votes were cast against the remuneration report.
The important point is that there only needs to be a 25% vote second strike against the Remuneration Report in 2014 for there to be a vote on a board spill.
In 2012, the Remuneration Report was carried with 116 million votes for and 11 million votes againt.
Times have certainly changed.
The family does not see how the 2014 Remuneration Report is going to get through, unless of course all the Directors and management agree to a pay cut.
2. HOW THE VOTING WENT
a.43 percent voted against the election of Mr Gregory Short
b.42 percent voted against the re-election of Mr Nicholas Heath
c.Mr Peter Henderson decided to forego his share issue
d.47 percent wanted Ms Glenda McLoughlin as a director
e.45 percent wanted Mr Michael O’Brien as a director
f.44 percent wanted Mr Stuart Glenn as a director.
These figures reflect the deep discontentment and resentment that is running through Metgasco’s shareholders with the current board, and the board has little reason to rejoice on their win. Rather, they should reflect on their performance and strive to significantly better the share price.
If we look at the 2012 re-election votes for Mr Leonard Gill, we note that he received 99.3 percent of the votes then. The family is of the opinion that the figure may have been a little bit different if he had stood this year.
We were told that Mr Nicholas Heath made a comment along the lines that he was impressed by the shareholder turnout and voting this year. If that was true, then the Board would be well advised to fully cogitate and appreciate the fact that the increased turnout and voting went against the Board. Shareholders were incensed enough to discard apathy to vote against the Board.
If the Board does not or cannot recognise this simple message that it has been given, it would in our opinion, be nothing less than an extreme case of hubris.
D. THE IMPLICATIONS OF THE VOTING
If this was a General Election, then the Governing Party should be clearly very concerned. There has been something like a 50 percent swing against the Ruling Party, and such swings continue to have MOMENTUM.
This swing was done by a group of shareholders in the Top Twenty List which did not have all the machinery and advantages that the incumbents have. But the scene has now been set, and the incumbents will have to reluctantly realise that things have been set in motion and that the Concerned Shareholder Group has learnt a lot from this initial foray and will do better in any future attempt.
The Incumbent Board has to realise that it only got across the line because it had the support of one very major shareholder.
This means that a huge number of smaller shareholders were displeased with the Board’s guidance and voted against it.
The Board must realise that the Concerned Shareholder Group can call for an EGM at any time, and the family feels that such a move may possibly occur after the 200 million shares that did not vote have been approached.
The family is of the opinion that the next move against the Board (at an EGM) will occur when enough votes have been assured to nullify the Board’s present supporters. This should not be too difficult in the light of what has happened and the way the voting went in the limited space of time the Concerned Shareholders had.
The Board must surely realise the state of the current untenable situation. Any forward planning that they hope to do is going to be inhibited by the time they spend looking over their shoulders, waiting for an EGM. That is not good for them, for the shareholders and for Metgasco, and must be avoided at all costs
E. A COMPROMISE HAS TO BE REACHED TO ACHIEVE A WIN-WIN SITUATION FOR THE BOARD, FOR SHAREHOLDERS AND FOR METGASCO.
It has been reported that the Board wants to meet up with the Concerned Shareholder Group to mend fences. If this is true, the family feels that it is a step in the right direction.
Fences can be mended in many ways.
a.There can be superficial consultation, with no proactive interaction
b.There can be earnest consultation with positive proactive responses
c.The Board can acknowledge the deep discontentment that shareholders have, and acknowledge the closeness of the voting by offering the Concerned Shareholder Group at least two Board seats. This would be the most equitable solution.
However, as the current constitution only allows for 5 Board members, one of two things will have to be done.
Either a current Board member steps down to make way for the two new members or else the Constitution will have to be changed to allow for six Board members.
Hopefully, an existing Board member will put the company’s best interests before his own and retire gracefully, so that a more diverse Board can be put in place, whose members are perceived to be able to think independently and unbiasedly without having old allegiances as baggage in their decision making.
These are just the family’s thoughts and are really of no consequence, as we are just humble uneducated Jamaicans.
Blessing of the Lord
Mr Lincoln Augustus LLB, MA, PhD(Phil)
MEL Price at posting:
14.0¢ Sentiment: Buy Disclosure: Held
(20min delay)