Rakon revolt sees director dumped
Company’s ‘ dismal’ performance spurs action by shareholders
nvestors yesterday dumped Rakon executive director Darren Robinson in a rare case of successful New Zealand shareholder activism.
Robinson, who is responsible for sales and marketing, was voted off the technology manufacturer’s board at its annual meeting in Auckland.
Over 70 million votes opposed his re- election and 57.5m were in favour.
Chairman Bryan Mogridge was reelected, with 109.4m votes going in his favour and 20.3m against.
In the lead- up to the AGM, the New Zealand Shareholders Association criticised the influence of Rakon’s founding Robinson family, which owns roughly 23 per cent of the company, as well its poor financial performance.
Darren Robinson, with his brother Brent, who is Rakon’s chief executive, and their father Warren occupied three of the six board seats.
The association had called on investors to vote against Darren Robinson’s re- election, while also questioning whether Brent was the right person to lead the firm.
The group said Warren, who founded the high- tech component maker in 1967, should stand down voluntarily. Mogridge told the meeting that Warren would retire from the board before next year’s AGM.
The association described Mogridge’s position as “up in the air” ahead of the meeting, but said it didn’t want to leave the firm “rudderless” by forcing him out.
At the meeting, Shareholders Association chairman John Hawkins said the company’s financial performance had been “dismal”.
“Year after year shareholders have been given upbeat forecasts or reassurances about corrective actions taken and year after year the reality has been very different,” he said.
The company has made only one annual profit — $ 3.2m in 2015 — amid total losses of $ 118.7m over the past five years, according to the Shareholders Association.
Rakon has blamed the net loss of $ 1.7m it posted for its last financial year on reduced spending by major telecommunications customers.
Rakon has never paid a dividend since listing in 2006.
“The company has a poor history of being able to work out where it is going and what kind of income it might expect, so why should shareholders believe the latest claims, the latest promises and latest excuses from the same management and board?” Hawkins told the meeting.
He said the association saw Rakon as “a listed company being run as a private family concern”.
“The result is change or new ways of doing things have been considered unnecessary.”
Shareholder Mary Bell said: “If it’s taken 10 years and I’ve had no return on my shareholding, surely some- thing has to be done.”
Another shareholder defended the Robinsons, telling the meeting their skills were crucial to the firm’s future.
“They’re the only ones that will bring this company up,” he said.
Darren Robinson said Rakon’s customers liked the fact that he, as a director, had been able to represent their needs at the board table.
“Removing me from the board would send the wrong message,” he said.
Mogridge said he respected the association’s views and agreed that Rakon had performed well below expectations over the past five years.
“As directors and senior management of Rakon, we accept responsibility for these inadequate results.” He said the company was making progress in its goal of reducing operating costs by 20 per cent.
“This activity will be completed by the end of this fiscal year,” Mogridge said. “The consequent reduction in costs will enhance next year’s profit, but as the costs of change need to be considered in this year, the overall impact on [ the current year] i s minimal,” he said.
Brent Robinson said job cuts had taken place, although he didn’t say how many in his address.
Mogridge said Rakon would consult with the association and large investors as it sought new directors.
It’s been a rollercoaster ride for Rakon investors since it listed on the NZX at $ 1.60 a share in May 2006.
The stock jumped by a third on its first day of trading and soared to a record close of $ 5.67 within a year, giving the business a market capitalisation north of $ 700 million.
But the global financial crisis and an ill- fated expansion into Chinese manufacturing hit the company hard.
Its shares have slumped about 38 per cent over the past year to close at 22c last night, after rising 10 per cent yesterday.
Management salaries have also been a contentious issue.
Brent Robinson received a 24 per cent increase in his total remuneration in the last financial year, to $ 907,892, while Darren enjoyed a 22 per cent increase to $ 734,605.
Hawkins has said those increases were “outrageous”.
Mogridge told yesterday’s meeting that the pair’s salaries had been reduced by 12.5 per cent in the current financial year.
“This will reduce the income they receive by 28 per cent compared to what was detailed in our 2016 annual report.”