New Xero boss’ David Jones baggage

His share purchase within days of a profit-lift announcement was one of the reasons behind a clash between director Steve Vamos and institutional shareholders in Australian retailer David Jones.
Steve Vamos says “You need to accept that mistakes are learning. Instead of being a know-it-all, be a learn-it-all.’’

Xero chief executive Rod Drury complained about what he saw as negative local media coverage after his company announced its decision to delist from the NZX.

He complained his company should have had “some hometown support rather than 10 years of scepticism.” (Sorry Rod, while NBR is pro-business, we’re not soft on business. We apply tough love, and at times Xero’s valuation and other elements of its business have warranted scrutiny.)

And former Xero director Sam Morgan said the state of the media coverage in New Zealand was one reason to move to a bigger market.

Grass is greener?
So how is press coverage going for Xero since it went ASX-only at the start of February?

It started off well, with a series of puff pieces more or less repeating Mr Drury’s narrative.

But it all turned to custard yesterday as the Australian Financial Review dragged up an episode from incoming chief executive Steve Vamos’ recent past (Mr Vamos will replace Mr Drury on April 1).

Whereas New Zealand media – or, at least, NBR – has noted the problematic nature of Mr Vamos’ two-year directorship with troubled Fletcher Building (a role he wants to maintain), it was an earlier directorship highlighted by the Aussie paper.

An AFR piece titled “Xero's new chief Steve Vamos knows how to sing his own praises” ribs Mr Vamos for having a personal branding website ( — arguably a perfectly valid vehicle given that before his Xero appointment he was freelancing as a consultant and needed to promote his services).

More seriously, it notes, “Not explicitly mentioned on the website is by far the most scandalous bit of Vamos' otherwise highly successful board career, which is when he resigned after shareholder pressure from the David Jones board after buying shares (with his chairman's approval) a day after the then-listed department store received a merger proposal from Myer, and days before it posted a strong sales result.”

Mr Vamos made his share purchase one day after David Jones received a confidential $A3 billion merger proposal from Myer, and three days before the result was announced.

The upbeat earnings result, announced in late 2013, saw David Jones shares enjoy a 15% bump.

Mr Vamos did proactively notify ASIC (the Australian Securities and Investment Commission). The regulator subsequently instigated a two-month investigation into insider trading concerns but ultimately decided not to take any legal action.

Xero shares closed down 6.03% from $32.88 to $A30.85 on Rod Drury's surprise resignation on March 5. But they have since regained ground and then some, helped by the company's addition to the ASX100 on March 9. Yesterday, they closed up 3.12% o $A34.00.

Pressure from institutional shareholders
But despite his share purchase being within the allowed time window, and ASIC’s approval, both the AFR and The Australian reported Mr Vamos faced heat from institutional shareholders over the sale, plus the recent departure of chief executive Fred Zahra who was, The Australian says, reportedly “tired of the internal politics in the company and a dysfunctional relationship with some directors.” The “boardroom firestorm” was followed by the resignation of Mr Vamos as a David Jones director in February 2014.

Mr Vamos did not reply to NBR requests for comments.

But in remarks to The Australian last year – his first on the share controversy and his exit from David Jones – he said, “You need to accept that mistakes are learning. Instead of being a know-it-all, be a learn-it-all.’’

He also implies it’s ironic that in an age when many directors are accused of being asleep at the wheel of a gravy train, and not asking enough questions, he got in trouble at David Jones for asking too many questions.

It seems that whatever else, Mr Vamos’ tenure at the top of Xero will not be dull.

And what does Mr Drury make of the Aussie media’s rather rude coverage over the past couple of days? We don’t know. The Xero leader has disappeared off the face of the earth –– or at least from Planet Twitter – since he announced his impending departure on March 5.

RELATED VIDEO: Punakaiki Fund manager Lance Wiggs on Xero's future (Mar 5)

All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.

Login in or Register to view & post comments