RICH PICKINGS: Better at the bottom

The most fascinating stories from BRW's Executive Rich list are found towards the bottom, where you'll spot new entrants and entrepreneurs who have built a fortune from their humble businesses.

The one problem with rich lists in Australia is that the names at the very top rarely change. And so it is with the latest Executive Rich edition from BRW, which ranks the richest executives active in the day-to-day operations of the Australia's top 500 companies.

Fortescue Metals Group executive chairman Andrew Forrest replaces New Corp's executive chair Rupert Murdoch at the top of the list, but the other names in the top five are very familiar – James Packer, Frank Lowy and Seven Group chief Kerry Stokes.

With this in mind, the most interesting stories are usually found towards the bottom of the list, where you can spot the new arrivals and the entrepreneurs who have managed to build a fortune from their humble businesses.

Mining a fortune

The overarching theme of the Executive Rich is the rise of the miners. But it's not just the heavy hitters like Forrest, Aquila's Tony Poli and Linc Energy's Peter Bond.

Mining services group Maca, which listed in November 2010 and jumped 45 per cent on debut, provides one of the more impressive debuts on the list, with operations director Geoff Barker joining with a stake valued at $57.5 million.

While Maca is a relatively young company – it was set up in 2002 – Baker is an old mining hand, having spent more than 35 years in the industry. He also sold $4.5 million worth of shares in the IPO, meaning he has had a pretty good six months.

Aurora Oil & Gas executive chairman Jonathan Stewart joins the list at a respectable rank of 64, after riding the recent hype around shale oil.

He's hardly a new name on rich lists, but veteran coal miner Brian Flannery makes an appearance on this year's list with a stake of $74.7 million in White Energy Coal. Flannery, who earned about $500 million when he sold his stake in Felix Coal in 2009, appears to be building another impressive fortune.

From the shop floor

While many of the managers on the Executive Rich list spent decades in their industries before striking it rich, few have spent their entire career with one company. But there are some exceptions.

Don Meij, the chief executive of the Domino's Pizza, is on the list at position 162, thanks to his $18.2 million stake. While he now runs a business with stores stretching from Brisbane to Belgium, Meij really did learn the business from the ground up.

He started as a delivery driver for Silvio's Dial-a-Pizza in 1987 and graduated to store manager in 1989. Two years later, he was appointed director of national operations for Silvio's and when Domino's bought Silvio's in 1993, Meij became general manager.

In 1996, he became a franchisee, building a chain of 17 stores that he eventually sold back to the company in 2001. In the last 12 months, Domino's shares have risen almost 37 per cent.

In the family

Another notable feature of the list is the number of family connections. Perhaps most notable are James Murdoch ($16.2 million), son of Rupert
($5.7 billion) and Katie Page ($50.8 million), wife of Gerry Harvey ($933 million).

There are a number of brothers too, led by Village Roadshow pair John and Robert Kirby (both on $97.9 million) and David and Aidan Tudehope of
Macquarie Telecom (on $133 million and $24.6 million respectively). Roger and Andrew Brown of four-wheel-drive parts maker ARB Corporation also feature with $74.4 million each.

The staggering scientist

The most impressive performance on the list in undoubtedly Silviu Itescu, founder and chief executive of drug therapy company Mesoblast.

In a stunning 12 month period – during which the company's share prices has more than tripled – the value of Itescu's stake has jumped from $72.4 million to $460 million thanks a series of big corporate wins.

In December 2010, US drug company Cephalon grabbed a 19.9 per cent stake in Mesoblast for $220 million, plus an up-front royalty payment of $130 million and potential milestone payments of $1.7 billion.

It's also worth noting that at least one analyst has a price target of $11 on Mesoblast shares, which are currently trading around $7.83. Itescu's rise looks to be far from over.

All your eggs in one basket

While many of the managers on the Executive Rich list could find their colleagues casting jealous looks in their direction in the company, these same colleagues would do well to ask the executives if they actually feel rich.

The value of shares might look impressive on paper, but as many of these executives know, paper doesn't necessarily pay the bills.

And for executives in small companies, selling down shares is often not an option – smaller companies generally has relatively illiquid share registers and the sale of a large number of shares can weigh heavily on the company's stock price.

In addition, the sight of a key executive or executive director cashing in can have the unfortunate effect of spooking other investors.

Prior to the financial crisis, many executives solved the problem of being unable to convert their paper fortunes into actual cash by using margin loans.

Indeed, it was this strategy that meant smaller companies were hit hard by the collapse of margin lender Opes Prime – as the broker allowed clients to borrow against virtually any shares they were prepared to pledge as security, Opes became popular with small cap executives keen to diversify their personal financial portfolios or live a lifestyle their paper fortunes should have made possible.

Many executives on the list will only be able to cash in their chips when they depart.

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