Still counting the cost 3 weeks later

Posted April 15, 2012                                                          Twitter: @PaperlinXsuX
This post considers Harry Boon's four ASX directorships and is based on material principally sourced from Annual Reports. 

PaperlinX's EGM three weeks ago resolved nothing for Harry Boon.

It could be argued that life has got worse since then, particularly at Hastie Group and PaperlinX, before even considering what shareholders at Toll and Tatts must now be thinking.

Question:  How will Harry resolve his self made problems?

Thought:   Ignore what people say, watch what they do.


Thursday, April 12, 2012.  Shareholders in Hastie Group Limited (HST) today saw their shares drop 25% in one day to close at another all time low of 16.5¢.


This is sad for all HST stakeholders as their future looks bleak. It highlights continuing problems for PaperlinX investors too.


Problem #1 shows the losses suffered by Hastie Group and PaperlinX investors over the past 12 months.


Problem #2 shows the losses suffered by Hastie Group and PaperlinX investors since Harry Boon was appointed a director of PaperlinX on May 5, 2008.


If this is the best that directors of these companies can deliver then perhaps they should all go. Maybe that is Andrew Price's Plan B for PaperlinX . Who knows? I’ve no doubt there is a Plan B although it’s not known to suX. What is certain is that if Andrew Price returns it will be more bruising than previously. Dirty tricks beget dirty tricks.


The losses keep mounting


About Hastie Group - I know nothing about this business other than:

1. What the share price tells everyone;
                   
2. Harry Boon was appointed a director of Hastie Holdings in Dec 2004, and subsequently Hastie Group Limited upon its incorporation on Feb 4, 2005. He’s been at Hastie from the start so there are no predecessors to blame; and
     
3. Harry Boon has invested substantially more in HST shares than PPX shares. On my reckoning, it’s in the order of $423,000 (now worth $18,000) versus $62,000 (now worth $21,000) respectively.          

He must have thought HST was a better investment proposition than PPX - Gulp! 

Here is a summary of Harry Boon's purchase of shares in Hastie Group since 2005.

Reconciliation to the 2011 Annual Report of Hastie Group, shown in green above, is available here.

What I find confusing is why Hastie Group looked so attractive to Harry Boon and PaperlinX so unattractive.

What would Bill Clinton say?

PaperlinX investors know by heart the litany of excuses given why PaperlinX has been a dud investment for many years. To paraphrase Bill Clinton “It's the management, stupid.” 

Those who attended the EGM will recall that Harry Boon was asked about the poor performance of Hastie Group. 


His reply was that it essentially arose from bad debts incurred in the Middle East. The clear implication was “not my fault” – i.e. the problems at Hastie are external because debtors in the Middle East won’t pay. 


This is wrongful abrogation of board responsibility. Hastie Group imprudently or recklessly granted credit that is now unrecoverable. It’s that simple. 


Harry Boon boasts of his international business experience when working for only one company, with a strong brand, for 26+ years. Clearly that experience hasn’t benefitted shareholders of Hastie Group since inception or PaperlinX in recent years.


Is it overload or incompetence?


Harry Boon currently holds two non-executive directorships (Toll Holdings and Hasties Group) and two chairmanships (Tatts and PaperlinX) which according to ACSI is six directorship equivalents. ACSI recommends four only directorship equivalents and definitely no dual chairmanships. 


The Australian Council of Superannuation Investors (ACSI) was established in 2001 to represent the collective interests of ‘profit for member’ superannuation funds on the management of environmental, social and corporate governance (ESG) investment risk. Today ACSI has more than 40 members who collectively manage over $300 billion in retirement savings, including international associate members. More about ACSI here.


The ACSI guidelines are unrelated to a person’s ability or work ethic. They are guidelines to ensure that when a systemic share market crisis occurs, such as in 2008-09, each director isn’t spread too thinly to properly discharge her obligations to each company. This isn’t just my view; it’s the view of any responsible authority on corporate governance.


What happens when non-executive directors are over-stretched


It’ll be a long while before anyone forgets the sheer panic of 2008-09. PaperlinX was in crisis with debt and CFO Lamont resigned in September 2008. There were 22 board meetings. Where was Harry Boon?  


Harry Boon, the newbie appointed in May 2008, could only attend 18 of 22 full board meetings in 2008-09. 

It gets worse. In 2010-2011, HST was in crisis and had 43 full board meetings. Harry Boon could only attend 31 (72%) because …? Perhaps he had more important things to do elsewhere – perhaps even at PaperlinX. 


Hastie Group investors should consider that in 2010-11 Harry Boon was a non-executive director of PaperlinX! He became chairman later in the year.

I case you think I’m being unkind, after all Phillip Anderson only attended 36 of 43 full board meetings, then check out his bio and compare it with that of Harry Boon’s. Do you see any similarities?


Harry Boon’s Workload 2010-11

Here is the share price performance of Harry Boon's Directorships against the ASX 200 for 2010-11.



ASX 200                +8.3%
Tatts                      +6.7%
Toll                       -12.5%
PaperlinX             -72.6%
Hastie                   -88.7%


See it in graphical form here.


More about black out periods and directors' share trading.


Observant readers will notice that during 2010-11, Hastie Group had 43 Board Meetings yet Harry Boon was able to buy shares on five separate occasions, refer green section above.


Whereas at PaperlinX, there were only eight board meetings in 2010-11 resulting in a purported year long black out period. 


Messrs Boon and Marchant have both incorrectly stated they were unable to purchase shares in PaperlinX due to "black out" periods. Harry Boon even asserted that the period preceding the EGM was a black out period. Go figure!


Yet Tony Clarke found a buying opportunity where Harry Boon and Toby Marchant couldn't, see Tony Clarke's Appendix 3Y here. 

Isn't this all very odd! 


Decision Time & Process for Harry Boon


Decision #1 Resign as chair of either Tatts Group or PaperlinX. This is mandatory and brings the directorship equivalents down to five.


Decision #2 Resign as a director of one of either Tatts Group, or Toll Holdings, or Hastie Group or PaperlinX. This brings the directorship equivalents down to four.


How would a rational person make these decisions? Out of self interest of course; which is how we all generally make decisions. First, what to keep:

• TOL is a member of the ASX 50 - a must keep; and
       
• TTS is a member of the ASX 100 - another must keep, besides Harry Boon is a founding director and chairman.

This gives three directorship equivalents. Only one more is allowed if compliance is the objective, and surely this is an imperative otherwise the shareholders of TTS and TOL may become restive. 


What are the remaining options?


If resigning the chair of PaperlinX is accepted as mandatory, surely this must be obvious by now; it’s highly unusual for a resigning chair to remain a director. Besides, having been a founding director of HST Harry Boon has a moral obligation to see it through at present. 


The answer to Decision #2 is obvious; resign as a director of PaperlinX. This will also align with the wishes of 48% of shareholders and would be embraced by the hybrid holders. 


Now isn’t the right time


It never is and this certainly isn’t the time to fudge by making promises for the future. 


The investors in PPX and HST are way past promises. Remember Harry, no one is indispensible. What would happen if you walked under a bus tomorrow? 


If PaperlinX cannot continue without you, an over-stretched chair, then you’ve identified another problem created your predecessor chair and acceded to by you – succession. You’d no doubt understand this glaring shortfall as Chairman of the Remuneration and Executive Succession Planning Committee at Toll Holdings.


Three of your six directorship equivalents are in crisis, Chairman of PPX (2) and non-executive director of HST (1). The fallouts from these two companies could ruin your reputation forever. 


No one is listening to you


Do you really believe investors in PPX and HST care about your sensitivities? Do you know what the compromised fence sitters really think? 


If anyone is in doubt about the term "compromised fence sitters", I can best explain them as persons who desperately want change at PaperlinX but cannot afford to lose face by voting out an establishment figure like Harry Boon. They want someone else to do their job.


Your recent comments in the press are demeaning. Everyone knows that 52:48% was a personal non-endorsement. 


Revisiting May 5, 2008


Directorship overload is of your own making. You cannot blame reduced demand for fine paper, the GFC, legacy issues, Tom Park, the AUD, the Euro crisis, those pesky defaulters in the Middle East or even suX. 


This decision was made by you alone.  


When you were appointed to the board of PaperlinX that increased your directorship equivalents from six to seven. See here. Seven directorship equivalents was a 75% overload. How can you possibly justify that? 


Dismiss any excuse that you’d be resigning from Gale Pacific in November, 2008. The fact is that as at May 2008 you knowingly flaunted prudential guidelines.


No one anticipated the severity of the GFC meltdown in 2008-09, nor did anyone anticipate the meltdown at Hastie in late 2010. Both events put extraordinary stress on the boards of PaperlinX and Hastie Group respectively.


That's why prudential guidelines exist and why you must abide by them. 

It's not personal, just the right thing to do.