read reed egm notice-get extraordinarily sick

I had a good look at the EGM document and I feel sick. The company is forcing the outsider shareholder to make an unfair decision. You either back the enormous increases in director pay via share awards (not options) thus diluting your holding OR the company pays them out in shareholder cash.

Here is my analysis:

1. Luke Tonkin (LT) joins the company as MD on a salary of $599,500. Note the "Kmart pricing"

2. LT may be awarded a bonus of up to 50% of salary $300K at sole discretion of directors. (page 6)

3. LT gets 833,000 shares for "signing on" =$166K at today's price

4. LT gets another 833,00 shares on 30 June 2013 for "signing on" which apparently are called "performance " but actually are NOT PERFORMANCE BASED (see page 9). Indeed there is something called "long term performance rights" that appear to run concurrently with the "Sign-On performance rights" which I will detail below

5. LT gets another 834,000 "sign-on performance rights" on 30 June 2014"

6. LT gets more shares each year under the heading "Long Term Performance Rights" based on the volume weighted share price (see page 11). If this formula were applied today at (say VWAP =20 cent share price) LT could get

P=(83.33/100) * (600K + 300K bonus)/ 0.20 =3,749,850 shares of value $749,970
The performance hurdle is not properly defined (page 12) It is based on the performance of un-named peers NOT on share price performance. That is if the share price decreases the rights can still be awarded AND because the SP is in the denominator of the formula the lower the share price the more shares that are awarded. Say SP fell to 10 cents then in above formula LT gets 7,499,700 shares valued at 10 cents or $749,970 exactly the same money as at 20 cents SP, even though he may have presided over a HALVING in the market value of the company !!!

7. So now let us see what LT benefits in ONE YEAR

Salary $600 000
Bonus $300 000 at sole discretion of directors
Sign On $166 600 (each year for 3 years based on SP of $0.20
Long Term Perf $749 970 (yes he gets long term performance in year 1 !!)

TOTAL $1,816,570 This is obscene !!!

There is nothing to say that he cannot dump the shares on the market (and lower the share price) at any time he feels like it.

8. Chris Reed vacates managing the company and now gets similar (but less than Luke Tonkin) Signing On AWARDS and long term incentive performance rights and his "take home total" increases ENORMOUSLY. What extra value is he giving the shareholders of the company I ask with tears in my eyes? He has less responsibility and gets more than double the pay. Again I say it is obscene.

Chris:
Salary $446,900
Bonus $148,966 (bonus up to 1/3 of salary)
Sign on $200,000 (1 million rights NOT tied to performance)
Long Term Perf $297 933 (calculated on his formula p11)

TOTAL $1,093,799 compare this to his 2011 reported $430K

9. And now for the "blackmail". If you as a shareholder vote AGAINST giving Luke and Chris what is RECOMMENDED by the the directors of the company (page 14) then you have to drink from the poison chalice on page 7 that is Luke now gets $500,000 cash compensation and Chris gets $300,000 cash
from company funds thereby reducing the value of the company and putting pressure for possible fund raising to keep the cash cow going for the benefit of the directors.

Guess who set up the employment contracts with these insane terms?
Did they ask the shareholders for approval before signing these employment contracts?
Would they even be asking us now for approval if the ASX rules did not require it?

Note that these awards appear to be far in excess of the average awards to directors of peer companies and yet on page 7 they say they got advice from an independent remuneration consultant. Q. Who pays the consultant to give the advice? A. The company at the direction of the directors. Q. Will the independent consultant get paid again if he does not reward the directors handsomely for their business? A. Of course not. Just like the Fitch and Standard and Poors and Moody's ratings agencies in the run up to the GFC. They looked after those who paid them to have their rubbish financial instruments valued "nicely" and all the AAA garbage that our local municipal authorities invested rate payer money into as well as so many others .....took it straight on the nose.

Shareholders of RDR we need to do something here !! This is well beyond acceptability.