By Sue Mitchell
Myer has moved quickly to appease its second-largest shareholder, veteran fund manager Geoff Wilson’s Wilson Asset Management, who called on the retailer to shrink its board and directors fees.
Myer announced the retirement of two of its six non-executive directors a day after Mr Wilson sent a letter to Myer urging it to reduce the number of directors and permanently reduce directors’ fees.
Lyndsey Cattermole and Julie Ann Morrison will not seek re-election at the annual meeting on October 29 and will not be replaced, shrinking the board from seven to five.
The remaining non-executive directors will be JoAnne Stephenson, who has been on the board since 2016, Jacquie Naylor, who joined last year, David Whittle, who has been a director since 2015, and Myer chairman Garry Hounsell.
Mr Hounsell said the chairman and non-executive directors had also elected to reduce their annual base fee to $250,000 (from $300,000) and $100,000 (from $120,000) respectively.
This followed a 16.7 per cent reduction in directors fees in 2020 because of the coronavirus pandemic. It is the third reduction in fees since 2018 and the reduced fees will remain in place for at least two years.
Replying to Mr Wilson, Mr Hounsell said the reduction in the size of the board had been under consideration for some time.
“The Myer board is extremely mindful of minimising board and other costs, and the board size must reflect the size of the business, and the ongoing focus on costs, especially in the current environment,” he said.
However, retail industry sources suggested WAM and Myer were “in cahoots” and the announcements were timed to make both sides look good. “The sequence of events is too cute by half,” said one source.
Myer’s move is unlikely to appease its largest shareholder, Solomon Lew’s Premier Investments, which owns 10.8 per cent and wants the entire board to step down in the wake of the retailer’s $11 million operating loss and $172 million bottom-line loss in 2020.
Mr Wilson has been a vocal supporter of Myer in the past and teamed up with Investors Mutual to thwart Mr Lew’s attempts to roll the Myer board in 2018.
Premier has not nominated directors to stand for election this year, even though Mr Lew has a better chance of success after the sell-down of Investors Mutual. However, the Lew camp has not ruled out engaging the support of other shareholders and pressuring the board to stand aside at the AGM or calling for an extraordinary general meeting.
Mr Hounsell also responded to Mr Wilsons’ other concerns about the size of the Myer director fee pool, the exit of suppliers and the withdrawal of trade credit insurance for suppliers.
The current maximum director fee pool limit of $2.15 million was originally set in 2009, at the time of the Myer float, and has never been reduced. Following the retirement of Ms Cattermole and Ms Morrison, total fees payable to directors will fall to $570,000, representing 26 per cent of the maximum pool, and Myer will review the pool before the AGM.
Mr Hounsell suggested the departure of some suppliers was due to changes in Myer’s product range, rather than supplier concern about Myer’s prospects, as Mr Lew suggested two weeks ago.
“During COVID-19, we’ve seen significant increases in customer demand for some categories and brands, and decreases in others, and Myer must adjust its range accordingly,” he said,
While two trade credit insurers had withdrawn cover for suppliers during the pandemic, this was in the context of tighter cover for the retail sector globally and was not specific to Myer.
Myer continued to pay suppliers according to existing terms, or better, had not lost any key suppliers as a result of the withdrawal of trade credit insurance and continued to receive the supplies it needed, Mr Hounsell said.
Furthermore, Myer recently extended financing facilities to August 2022, giving further confidence to suppliers as to its ability to pay.
Mr Hounsell also confirmed the board’s intention to pay dividends and distribute franking credits, when it was prudent to do so.
Myer shares rose 3 per cent to 23.7¢.