Running discussion on SP, page-6249

I agree with sentiments here that Mr Klaus Erkhoff selling such as large amount of shares in the manner he chose to do so, should result in his removal.

Many shareholders are rightly gutted by his decisions, and the impact it has had on their wealth.  However, I wonder if this sentiment is only because the share price has dropped so dramatically.

How many shareholders vote no to bonuses, free options or shares with poor short-term performance triggers at AGMs?  I have routinely voted NO to these for a number of years, in most companies I invest in.

If shareholders support the delivery of free options, shares and bonuses, on top of generous salaries, there are a number of unintended outcomes that reduce shareholder value.  The most obvious is dilution, but there are others.

Some argue these are necessary to attract ‘great’ people who add value to the company.  But this just doesn’t seem logical to me.  Pretty much all companies now provide generous add-ons - it has become the norm (actually more like an arms race).  How does this attract the best talent if it is not just given to the best, but to all and sundry?

In my opinion, overly generous packages may attract the wrong people.  If leaders look for positions solely based on the most generous packages, rather than on a genuine curiosity, excitement and commitment to the company, they have little to lose by shafting shareholders.  Perhaps only their reputations, but we seem all too quick to forget their narcisism when the share price increases.  They can simply move on to the next shiny thing.

So let’s say we have attracted a ‘great’ performer who isn’t just salary shopping:  Do the incentives automatically result in them doing a better job?  If a bonus becomes a ‘right’ in the minds of company leaders, their performance may not always be altruistically tied to the company and its shareholders.  Unfortunately, many people look after number one.  

Take Mr Erkhoff… he sold his shares - given freely to him by the shareholders without limitations or boundaries on what he can do with them.  The shareholders gave him that right and allowed him to put his personal agenda ahead of his responsibilities to AVZ and its shareholders.  We gave him the right, and ‘hoped’ he would be responsible.

The best talent do not need exorbitant incentives to perform.  Just like shareholders, they can choose to invest their earnings in the company by buying options and shares on market.  If they have a genuine excitement and commitment in the company’s future, they can watch their wealth grow along with shareholders.  Isn’t that the best incentive to perform well, and a clearer indication to the market of their genuine sentiment?

Shareholders only have control over 2 things, where, when and how they invest their money and how they vote at AGMs.  Unfortunately, the ‘club’ and their supporting institutions like the status quo.  This usually means the top 20 in a company will vote in favour of such schemes.  Nevertheless, I exercise my voting rights to register my disapproval.

Good luck with your decisions.