Institutions sink Hegarty's payout

INSTITUTIONAL shareholders have blocked a planned $10.66million "early termination" payment to Oxiana's founding managing director Owen Hegarty, the man credited with turning it from a penny dreadful in 1994 into Australia's third-biggest diversified resources group.

INSTITUTIONAL shareholders have blocked a planned $10.66million "early termination" payment to Oxiana's founding managing director Owen Hegarty, the man credited with turning it from a penny dreadful in 1994 into Australia's third-biggest diversified resources group.

Oxiana was compelled to withdraw a resolution seeking approval of the payment at a shareholders' meeting in Melbourne after it became clear it was lost on proxies carrying a "no" vote of 56.5%.

Mr Hegarty was in the front row of the meeting room when Oxiana chairman Barry Cusack revealed the resolution would not be put.

Mr Cusack said Oxiana would be taking advice before deciding how to proceed in a way that it could "treat Owen fairly in the circumstances".

He had earlier described Mr Hegarty as the "indomitable spirit" of the fast-grown resources group. Over the years, Mr Hegarty has assembled a personal stake in Oxiana that was worth $73 million yesterday.

A smiling Mr Hegarty said after the meeting it was clear that institutions rather than Oxiana's retail shareholder base had blocked the payment. That was reflected in the 64% "yes" vote based on the number of shareholder proxies.

Mr Hegarty continues as a non-executive director of OZ Minerals - Oxiana's new name after its recent merger with Zinifex, a change approved by a 96% majority at the meeting.

Although described as a termination payment, the $10.66million Oxiana had earmarked for Mr Hegarty could also have been called a facilitation payment. That was because Mr Hegarty's early retirement was part of the merger deal with Zinifex that allowed its managing director, Andrew Michelmore, to become managing director of the merged group.

Mr Hegarty had two years to run on a three-year contract and the planned payment was about equal to twice what he got last year as managing director.

But the plan to compensate him for what he might normally have got in the absence of the Zinifex merger fell foul of the corporate governance proxy adviser industry. It is believed to be the first time shareholders have rejected a payout for a departing executive - mainly because it is very rare for shareholders to have the right to vote.

A termination payment can be made without shareholder approval as long as it is below a threshold of seven times the executive's earnings in the previous year. In Mr Hegarty's case, the payout was beyond this, and so had to be put to a shareholder vote.

Dean Paatsch, director of corporate governance adviser RiskMetrics, said it was not clear what the future benefit for shareholders would have been if the payment had been made. RiskMetrics advised its institutional clients to vote against the payout.

He said the biggest issues were the payment of Mr Hegarty's 2009 bonus and options he was due to be granted in April 2009.

The enlarged exposure to zinc that the group's merger with Zinifex brought was behind the shares sinking to a two-year low of $1.96, valuing the group at $6.11 billion.

Oxiana and Zinifex had a combined market value of $12billion when the merger was announced in March.

Barry FitzGerald owns Oxiana shares.

KEY POINTS

? Oxiana's board had set aside $10.66m for Owen Hegarty.

? Investors holding 56.5% of the merged company's shares rejected the plan.

? OZ has lost half its value.


Join the Conversation...

There are comments posted so far.

If you'd like to join this conversation, please login or sign up here

Related Articles