hegarty denied golden handshake, page-3

The following article in "The Australian" is spot on. Particularly like two sentences: "The payout was dumb" and "as Cusack now knows, the shareholder revolution is alive and well."

Oxiana investors deny big payout for outgoing boss
The Australian MARTIN COLLINS: John Durie | July 19, 2008

INCOMING OZ Minerals chair Barry Cusack has surely learned his lesson this time after shareholders of his old company, Oxiana, comprehensively rejected a sweetheart pay deal for his chief executive Owen Hegarty.

The rejection at yesterday's last annual meeting for Oxiana, before it combined with Zinifex to create OZ Minerals, represented the first time Australian shareholders have rejected a termination payout for an outgoing boss.

Proxies were running against the deal by around 774,000 to 575,000 and instead of facing defeat, Cusack simply withdrew the motion -- which killed any debate on what, on any measure, was a show of extraordinary arrogance.

Hegarty is an absolute legend in the Australian mining industry and in Oxiana he has converted a collection of Rio Tinto discards into what will soon become Australia's third-largest diversified miner, with a value of over $12 billion.

But he was paid well for his efforts along the way.

Cusack tried to push through termination pay totalling some $10.7 million or seven times his annual pay.

The really dumb part about the payout was the fact that with some slight adjustments the payout would have escaped shareholder scrutiny altogether.

This column would be the last one to advocate any move to defeat transparency, but surely the crew at Oxiana would have looked at how the ASX dealt with its outgoing boss Tony D'Aloisio, who received 6.7 times his last fixed pay when he left en route to being the chief corporate cop at ASIC.

A slight adjustment would have avoided the requirement for a vote in the first place, which was not lost on the ASX when it paid D'Aloisio some $7.8 million a couple of years ago.

In its wisdom, the Oxiana board ignored such trivial matters and decided to base its payout on option grants that were yet to made, let alone earned, which was extravagance way beyond any degree of reasonableness.

This was on top of retention shares which would have come his way if he had stayed at the company until next year.

Some options were performance-based on next year's effort, which is a fair leap when you consider not only is the guy not planning to work as an executive for the company next year but who knows now what the performance will be.

Hegarty will be a non-executive director of OZ Minerals, which of itself is a little odd given he will be presiding over the work of his merger partner Andrew Michelmore.

ISS Risk Metrics recommended against the grants and was overwhelmingly backed by yesterday's proxy count.

The aforementioned Cusack was the Oxiana chair and will be the new OZ Minerals chair.

If one were to congratulate Cusack for at least putting the egregious payout up for a vote, given that he withdrew it in the face of certain defeat, this goodwill disappears.

The Corporations Act requires a vote if the termination pay is seven times the base salary, so no doubt Cusack will work out a way around this one.

One could suggest the Government would be advised to simplify the law and instead require a shareholder vote if the payout was more than last year's base salary.

This would tend to restrict a practice that could border on greed.

Thanks in large part to the allowance of non-binding votes on remuneration reports, Australian shareholders are becoming more active and interested in what happens at the company.

Voting turnout has increased from 30 to 60 per cent over the past five years, and on at least two occasions, Telstra and AGL, remuneration votes have gone against the company.

Option grants have been withdrawn when faced with shareholders revolts, as happened with former Tabcorp boss Matthew Slatter and Harvey Norman's Gerry Harvey.

Others have managed to get sweetheart deals through, as in the option deal granted to Toll boss Paul Little, giving him compensation for the fact he was only managing a smaller company after the Asciano split.

His shareholders are wondering what they got from the $6 billion spent on Patrick.

But as Cusack now knows, the shareholder revolution is alive and well.