The Executive Rich list published by BRW magazine late this week provides some fantastic insights into the state of financial markets and indeed the wider economy.
The stand-out feature of the list (which ranks the 200 wealthiest executives from our 500 largest listed companies based on the value of their personal shareholdings) is the incredible number of members from the resources sector - a whopping 71, compared with just 39 last year. It’s more evidence of how the sharemarket and the Australia economy are being propped up by the commodity boom.
The miners are led by Fortescue Metals chief executive Andrew Forrest, who skips past Rupert Murdoch and James Packer to top the list with a holding worth $8.4 billion. As BRW points out, the incredible $6.5 billion increase in Forrest’s wealth distorts the real performance of those on the list. When Forrest’s holding is excluded, the average wealth of list members drops from $220.1 million to $179.7 million.
The other notable feature of the list is the departures of big names including Allco’s David Coe, MFS’s Michael King and Phil Adams and ABC Learning Centre’s Eddy Groves. In all these cases, the huge margin loans held by these executives proved to be their undoing. That’s another huge change from last year’s list – 12 months ago, with equity markets riding high, margin loans simply weren’t an issue.
While BRW has not made an attempt to adjust its valuations to take into account margin loans – that’s fair enough, given it would be virtually impossible due to the poor disclosure from directors on this issue – but it does make you think about whether some of these executives have big debt skeletons hanging in the closet. Indeed, Greg Goodman’s decision to sell half of his Goodman Group shares earlier this week to eliminate his margin loans – which instantly reduced the value of his stake from around $500 million to around $300 million – highlights how margin loan problems can hit even the most respected chief executives. (Unfortunately for BRW, Goodman’s sale happened after its list was locked away.)
The best thing about the Executive Rich list is the way it highlights how Australia’s economic boom has turned ordinary wage slaves – chief financial officers, company secretaries, divisional managers and other middle managers – into wealthy shareholders. The best example is Forrest’s right-hand-man Graeme Rowley, who is executive director of operations and owns $165 million of shares. Fortescue’s chief financial officer Chris Catlow has $65 million worth of shares. Any more jobs going at Fortescue, I wonder?
I’m also impressed by the rise of the company secretaries. David Knappick, chief financial officer and company secretary of Felix Resources is worth $156.4 million; Platinum Asset Management finance director and company secretary Malcolm Halstead is worth $95.4 million; and Gillian Swaby, company secretary at Paladin Energy, Summit Resources, Platinum Australia and Comet Ridge, owns $62.1 million worth of shares. Traditionally, company secretaries were responsible for compliance and legal matters, but it is clear that their job descriptions, influence and share holdings are now much larger.
The wealth accumulated by these middle managers should give hope to desk jockeys everywhere. You don’t need to be a brilliant entrepreneur of brilliant business person to make a fortune – being very good at your job and finding the right company to latch on to can help you accumulate a handy pile of equity.
James Thomson was the editor of BRW’s Rich lists in 2006 and 2007 and was responsible for creating the Executive Rich list.