NZ Shareholders Association to vote against reelection of Rakon chair, director
The New Zealand Shareholders Association will next month vote against the reappointment of Rakon [NZX: RAK] chairman Bryan Mogridge and director Darren Robinson, citing erosion of shareholder wealth and the desire to improve company governance.
The Shareholders Association will use its proxies to vote against the reappointment of Mogridge at the Sept. 6 meeting in Auckland after shares in the maker of crystal oscillators lost half their value the past year, making it one the worst performers on the stock exchange.
"The clear message from retail shareholders was that they had lost confidence in Mogridge's leadership after years of disappointing results," Shareholders Association chairman John Hawkins said. "The company had been in a very competitive commercial environment but the reality is that the grand strategy championed by Mogridge is in tatters. The association believed it was time for Mogridge to go."
Shares in Rakon closed unchanged at 22 cents. The stock was sold to the public in 2006 at $1.60 apiece and rose as high as $5.80 in 2007 before slumping to a low of 18 cents in June this year.
Rakon expanded into China in 2009 and has a factory in Chengdu but the venture reported a loss of $2.8 million in 2013 compared to the $6.3 million profit forecast by management as adverse currency rates eroded margins. The company plans to sell 80 percent of its Chinese factory for US$18.8 million, taking a $32 million impairment and using the proceeds to reduce debt.
"Every company goes through some difficulties," Mogridge told BusinessDesk. "It is about having consistency of purpose. It makes no sense to chop and change things, especially when it is quite clear that Rakon had to move on from China. It costs a bit of money but the company is better off for not being there and it still has a good business base."
Still, Mogridge said the Shareholders Association is entitled to their view.
"They can do what they like, it's their entitlement," Mogridge said. "The company has got a clear strategy for fixing up issues in a difficult market and it doesn't make sense to change people around at this stage."
The Shareholders Association will also vote against the reappointment of Rakon director Darren Robinson, saying the founding Robinson family is over-represented on the board, holding three of eight positions, when the family owns just 23 percent of the company. Good governance requires separation between management and oversight of strategic direction and this is being comprised while Darren Robinson, who is head of sales, remains on the board, Hawkins said.
Rakon executive director Brent Robinson told BusinessDesk he disagreed with Hawkins' views, and believed Mogridge had been doing a good job as chairman and that he didn't believe his brother Darren's position on the board was an impediment.
"With a high tech company like Rakon he is a great asset to the board," Robinson said of his brother. "Darren and I complement each other's skills very well. Darren offers a good perspective from the market. It is difficult for a lot of people to get their heads around the technology so it is good to have the support of Darren there."
On the issue of overrepresentation of the Robinson family on the board compared with their shareholding, Brent Robinson said it was a legacy situation and it didn't do any harm.
The Shareholders Association doesn't expect to succeed in preventing the re-elections, as the family and other directors own about 30 percent of the company, Hawkins said. The Shareholders Association decided against contacting the 6,600 shareholders on the company's register because the cost was likely to outweigh the benefit, he said.
The Shareholders Association will support the re-election of independent director Herb Hunt and the sale of the Chinese factory stake, Hawkins said.