Keeping an eye out for the little guys
In the late 1990s, Vas Kolesnikoff was an up-and-coming investment banker at Macquarie Bank. He was working the hours and doing international deals as the Millionaire's Factory was building its empire. Then he moved on to a high-profile local role at US broker Merrill Lynch, as happens in the roundabout world of investment banking in a bull market.
In the late 1990s, Vas Kolesnikoff was an up-and-coming investment banker at Macquarie Bank. He was working the hours and doing international deals as the Millionaire's Factory was building its empire. Then he moved on to a high-profile local role at US broker Merrill Lynch, as happens in the roundabout world of investment banking in a bull market.Today, the 44-year old heads an organisation that looks after the interests of small shareholders, the Australian Shareholders' Association, often railing against the very system he was once part of to represent everyday investors.As he gears up for one of the most keenly watched annual meeting seasons in years, the single father of two reflects on life, family and work - and the role of a small not-for-profit group that struggles to have its collective voice of minority shareholders heard."There's a lot of issues that the ASA deals with, and a lot of people don't really understand that without the ASA, there's no one else [standing up for retail and self-managed super fund investors]," he says. "I took the job because I wanted to make a difference."And having spent 18 months at the helm of the group, Kolesnikoff knows he's got an uphill battle ahead of him. There may be what seems like a new vogue of austerity in corporate boardrooms, illustrated by a recent string of company bosses foregoing bonuses or having their salaries frozen. But asked whether the balance of power has tipped in favour of shareholders, helped by new laws to rein in the excesses of executive pay, Kolesnikoff is under no illusion."That's the buzz for this year - and next year they'll be taking their bonuses again ... There's a lot of lip service that people don't get," he says. He points to the "multimillions of dollars" Macquarie bankers were still reaping, despite investor returns below those of money held in bank accounts, or the recent $6 million-plus pay bonanza for AGL Energy's chief executive despite a fall in net profit. "The average person in a lifetime doesn't earn as much."A new "two-strikes" rule, which could start biting this year, giving shareholders the chance to spill boards over remuneration reports, has forced directors to engage more with investors, but things haven't changed enough: "The reality is it's a different world, but executives are still getting paid a huge amount of money ... It's a club. Once you're there, it's a gravy train."It seems a remarkable twist for a former banker who has forged his career in the high-flying corporate culture he is now holding to account, working for the likes of AMP, St George Bank and Westpac.Yet looking at Kolesnikoff's personal history, you can see it's really been a straight line.The only son of Russian-descent immigrants from China, who had fled during Mao's Cultural Revolution and arrived in Australia with just two suitcases, has seen first-hand how it is to start with nothing, build up an existence and then lose it all through flawed investments.His stepfather, a mining engineer who suffered from motor neurone disease and had to give up work when Kolesnikoff was in high school, poured more than half of his life savings into the ill-fated Estate Mortgage Trust. When its funds, marketed as a rock-solid investment with high returns, collapsed in the late 1980s in one of the nation's worst investment disasters, the money had vanished, and his parents never got back on their feet again financially."That formed my mind," Kolesnikoff says. "How could money just disappear like that and no one being accountable for it? ... That type of experience stuck in my head, and I wanted to learn as much as I can about business."Having earned his first dollars flipping burgers at McDonald's and working at a baby shop, the Trinity Grammar graduate got an economics degree at Sydney University, topped up with a Master of Applied Finance. His first job in finance was as an accountant at KPMG, before he joined Macquarie Bank's project and structured finance team. In the mid-1990s, "everybody wanted to be at Macquarie. It was the place to be" as the entrepreneurial investment bank was expanding.He stayed for five years, setting up an IT leasing business, helping in the refinancing of the Hills Motorway and working on some cross-border finance deals. After a brief stint at AMP, Merrill Lynch hired him for its global markets and investment banking team in 2000, where he advised banks on structured finance transactions and debt placements. He left in 2002 when the US broker fired staff globally in the economic jitters after the September 11, 2001, attacks.Looking back on his time in investment banking, Kolesnikoff says it was a very aggressive culture where "people were just very focused on how much money they were going to make for their own pocket. It was very much what's in it for me."The redundancy payout came at a critical time in his personal life, shortly after his second son was born. Kolesnikoff took extended leave to care for his boys, then picked up a consulting job with St George. After a marriage breakdown, he became a single parent."You look at the corporate world and think how far removed it is from the reality of people," he says reflecting on this period. "Some people have the luck of the draw and everything works out right, other people ... one day when I was in my thirties I was pulling out because I had to look after my children, whereas other people in their thirties are building their executive careers."He took on more finance work in the city, joining Westpac for a year before trying to gain more flexibility as a independent management consultant. When he saw the shareholders association's ad for a new chief executive, "I thought yeah, this is pretty spooky, this is what I wanted to do".With the growth in self-managed superannuation, the fast-talking shareholder rights activist sees a greater role for his organisation in the future. Yet to gain more clout and really become the voice of retail investors, he knows the not-for-profit will need more members. While more than seven million Australians own shares, only about 7000 have signed up with the ASA."A lot of people take [the ASA] for granted and what it represents," he says. There were misconceptions that the group was "just a bunch of old people screaming at AGMs", or a government body that didn't need supporters. Many didn't see that for a $120 membership a year - "a cheap bottle of wine a month" - the group offered investor education and company reports, and dealt with the stock exchange, government agencies and boards, he argues. "People need to be aware that the ASA exists and makes a difference", letting small shareholders put their equity together and pool their votes to gain influence with the companies they invest in, Kolesnikoff says.To boost the group's appeal, he has plans to provide more member services such as giving "shadow-shopping" advice, or secondary opinions on recommendations given by financial planners. "There are a lot of people who lost money just through bad advice."He knows what he's talking about. At present he is fighting with his own former broker, whom he wants to take to the financial ombudsman and the corporate regulator for "fraudulent misrepresentation" that meant he ended up paying higher interest on an investment loan.Where does a shareholder activist put his money? Kolesnikoff says he has sold most of his shares. But he still manages his own super fund, holds cash and has some direct equity investments in companies such as a privately-held watertank maker, where he is also a director.Asked what he likes to do in his spare time, the single father of two manages a dry chuckle. Describing his role at the ASA as "the lowest-paid, highest-stress job" he's ever had, the remainder of his time is generally "all about the children." Weekends are mostly spent travelling to training sessions and sporting events with the boys. The older one is a discus thrower in the NSW junior athletics team."For me, my biggest driver this whole period has been family," Kolesnikoff says. "At the end of the day, I'm just exhausted."The two-strikes force set for actionTHE upcoming season of annual meetings will be all about "performance, accountability, remuneration", the head of the Australian Shareholders' Association says.For the first time, boards can face the full brunt of the "two-strikes" rule introduced last year, giving shareholders the right to vote on proceeding to a board spill if a quarter of investors reject the remuneration report for the second year in a row.Some 108 listed companies experienced a first-strike protest vote last year.Will the ASA recommend its members vote in favour of second-strike board spills? "It's obviously going to have to be on a case-by-case basis," Vas Kolesnikoff says. "I don't think board spills are the solution. However, the power has to be there if the board really doesn't want to be accountable, continues to ignore shareholders and accept massive losses in shareholder value. Then they have to stand up in front of the AGM or the next meeting, and explain themselves."He says the shareholder group will take a more active stance in recommending against the re-election of some directors that haven't lived up to expectations."Historically, we've generally supported a lot of directors. We will be looking more carefully at individual directors ... and what they've added, if they continue to be accountable."
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