Voting at AGM - my thoughts.Shareholders are invited to vote at the coming AGM (online in advance if not attending).
Some of the matters voted on concern the bonus system for Directors and Executives.
My thoughts are these:
1. During the covid period, OBE came very close to bankruptcy. The Execs did a fabulous job stearing OBE through this crisis. They saved the shareholders from a lose of everything in bankruptcy. The share price reflected this change by going from pennies (30c ish) per share upto C$8 ish presently.
That is the kind of result that as a Shareholder I am happy to pay millions of dollars - in Cash or Shares - whatever those responsible wanted, I think they earned.
2. The Execs have now been paid for that fantastic job of saving the Company. They were paid with their agreed salary, and with a big bonus. Their bonus was given in shares and/or cash
3. That was then. This is now. Today OBE is in a very different place. It is not at risk of bankruptcy. The critical work has been done, and the Execs responsible have been rewarded.
4. OBE is now in a safe and steady place. Today, managing the company is about maintaining their production and adding modest production.
5. Going forward, managment is about allocating future cash flows efficiently - ie production, debt reduction, and returns to shareholders via dividends and share buybacks.
6. This is what is expected in return for the salary paid to each Exec.
7. Bonuses are not part of salary. Bonuses are there to align Exec interests with shareholders, to keep Execs from leaving, and to reward them for hitting predetermined targets.
8. The Bonus plan from the prior two years has allowed the currect Execs to have large shareholdings - either in direct shares or options. It follows that the Execs interest aligns with shareholders.
9. In my view, it is now time to change the prior bonus system. It should change so that Execs do not get such a large bonus based on dollar change in share price. They should be given share options at current market prices, that do not vest for 2-3 years. ie, as the share price increases, so do the value of their options. These options shoud be reasonable in number such that they do not significantly dilute the share base.
10. In the alternative, the bonus system could be changed to a fixed dollar amount, paid in cash or shares, if the share price hits certain thresholds. ie, $X if the share price ends the year at $15 for example (you get the idea). Put the bar at a fixed hight. If the Execs can clear that bar, then give them their bonus. If not, they get their salary, and another try next year. In the meantime, the Execs benefit from share price appreciation from thier previously awarded shares or options.
I will be voting NO on the existing bonus related votes at the AGM.
I will be happy to vote YES to a bonus plan that rewards the Execs for rewarding the shareholders. That was the bonus plan they had when the objective was to save OBE from bankruptcy.
Today we need a different bonus plan, because I believe the existing bonus plan is holding back the current share price.
If the Share price jumps to $20 in Q3 or Q4 for example, I don't want to find out that $50 million in that quarter has been assigned to the Execs as a result of the prior share price increase linked bonus plan. That could be 1/3rd of the quarter's FFO. That is a handicap that needs to be changed.
Every share holder can vote. Please think carefully about your vote, and vote accordingly.