BIG DIVIDEND ATTACKED

Dominion, Volume 29, Issue 199, 20 May 1936, Page 8

BIG DIVIDEND ATTACKED

Motorists’ Petrol Company LIVELY MEETING Preference Shareholders Complain Lively passages, and at times some heat, marked the adjourned meeting of the Associated Motorists’ Petrol Company, Limited, held in the IV ellington Chamber of Commerce council room yesterday to elect two directors to represent the preference shareholders for the next three years. The meeting was originally called a fortnight ago, but was adjourned pending the decision of a case by the Supreme Court as to the legality of the directors’ action in refusing the nomination of Mr. G. H. P. Fitz Gerald for one of the two vacant directorships. Meantime the judgment of the court upheld the action of the directorate and the meeting was resumed yesterday, it was to have been held at the company’s Courtenay Place offices, but these were found to be inadequate to accommodate the press of shareholders who desired to attend, and the place of meeting was transferred to the Chamber of Commerce room, which was taxed to capacity. The chairman of directors, Mr. Charles Todd, explained that the object of the meeting was to elect two directors, but added that he would welcome a general discussion on the conduct of the company’s affairs as the directors had been attacked. Full advantage was taken by _ the meeting of the chairman’s invitation; the preference shareholders to attack the 350 per cent, dividend paid to the holders of the 5000 ordinary shares, and the directors in defence of their administration. The rejection of Mr. Fitz Gerald by the board of directors was not an issue, practically the whole discussion turning on the point whether the preference shareholders ought not to receive more liberal treatment than they were receiving in view of the great financial success of the company. The result of the ballot will not be known until next Tuesday, to which day the declaration was postponed in view of the large number of votes to be counted. The retiring directors were Messrs. F. W. Johnstone and W. A. O’Callaghan, both of whom were renominated. In addition, Mr. W. M. King and Mr. J. Mclntosh were nominated. When the minutes of the original meeting a fortnight ago were read they were challenged by Mr. N. H. Moss, a preference shareholder, who contended they were incomplete in that no reference was made to the question of proxies. “They are a true record of what took place,” said Mr. Todd. “It was after the adjournment that I made reference to the proxies. I ruled that voting papers, proxies, and cancellations received at that meeting were to stand in status quo. Later on I found I was entirely wrong. Our solicitors advised that proxies could be received to within 4S hours of jto-day’s meeting.” Mr. Fitz Gerald: Mr. Mclntosh and I entered into a gentlemen’s agreement at the previous meeting not to canvass for proxies. He advised me by wire that the chairman’s decision was in error, and the truce was called off. Of Small Moment. The company’s solicitor, Mr. F. C. Spratt, said it was of small moment whether the statement of the chairman was made before or after the adjournment. He had given the candidates notice of his error. There was no reason why the point should not be added to the minutes. The secretary, Mr. L. G. Macmillan, said he was clear that the chairman had mentioned the proxies after the adjournment, and therefore it was not recorded in the minutes.

Mr. Moss said the question was not important to the meeting, but it might be important in another place. It was agreed that such a reference had been made, and lie would let it go at that. “I am very pleased to see so many here to-day; it shows that you are taking a live interest in a company that has done so much for New Zealand,” said Mr. Todd, amid applause, and irouieal laughter. ‘‘ln my hands rests the decision as ' to how the meeting is to be conducted, and I understand that the legal position is that the ballot only shall be the business. If the meeting desires, I and my fellow directors will reply to attacks made on the company. (Hear, hear.) We think this should be cleared up. Do you desire such a discussion?” Cries of “Yes” I Mr. Johnstone: I demand that the ballot be taken. Mr. O'Callaghan: I support that. The chairman suggested that the ballot be taken after the discussion, in view of the fact that 5000 or 6000 ballot papers would have to be counted, and it would be a few days before the papers could be counted. That would mean postponing the discussion. Scrutineers were appointed to watch the interests of the retiring directors and the new nominees. Argument then followed on the order jn which the candidates should address the meeting, and the length of time they should speak. Invited by several preference shareholders to “give an account of his stewardship.” Mr. Johnstone retorted that he could not cover all he wished to say in 15 minutes; it would take more like four hours. Voices: Well, do your best in a quarter of an hour. Mr. Johnstone declined to be the first speaker, and the chairman called on Mr. Fitz Gerald, who said he was willing to obey the chair. A shareholder asked for Mr. O’Callaghan to explain what he had done for the preference shareholders, and drew the rejoinder from Mr. Spratt that it was not for the meeting to tell the chairman what he should do. If he liked to allow a general discussion he could do so. An interjector (grimly) : He would be wise to allow it. A woman shareholder: In court proceedings the plaintiff speaks first. The chairman: The wisest thing said yet. “Black-balled." Mr. Fitz Gerald, speaking of the rejection of his nomination, said that no club failed to give a man a bint of why be was black-balled. His case failed in court because he could not prove that bis nomination had not received fair consideration by the board of directors ; such evidence could not be obtained unless he could have obtained a dictaphone record of what was said at the directors’ meeting. “I was beaten and I know how to take a licking,” he added, and claimed

I that although the judge bad given a I decision against him, and it had cost him £2OO to prepare and light the case, the preference shareholders had scored as large a victory as the directors, judging from the comment of the court in its finding. lie went on to say that he had never before heard of a company whose outside staff had been used to canvass for voles for retiring directors. He had received 600 letters from shareholders in all parts of the country expressing dissatisfaction with the manner in which their interests were being conducted. He did not suppose he would ever publish what was in some of them —it.would be distinctly libellous. He concluded by contending that the treatment accorded the preference shareholders was not ijj conformity with the spirit of the articles of association. Alleged Share Holding. As one who had been nominated as a director, .Mr. Mclntosh said that prior to March 17 ol: this year Messis. Johnstone and O'Callaghan held 2020 shares out of u. total of 5060 ordinary shares then issued. By a resolution passed on January 30, 1036, the ordinary share capital was increased by £20.000, and by virtue of the allotment made on March J 7 they now held in their own names or in trust 10.125 ordinary shares out of a total of 25,000. Messrs. Johnstone and O’Callaghan, as the representatives of the ordinary shareholders on the board, had a special duty to perform in that if they were not satisfied that preference shareholders had not been properly treated they should report the grounds of their dissatisfaction to the shareholders they represented. He was not aware that any such report had been made, and must assume that they were satisfied that the interests of the preference shareholders had been fully conserved by the directors. “Let us look at what happened last year,’’ continued Mr. Mclntosh. “The ordinary shareholders and the directors paid to themselves £20,000 for the year ended March 31, 1935 —namely, £2500 as payment for their services as directors, and £17,500 as a dividend on their investment of £5OOO, having ignored the obvious necessity of making adequate provision for reserves. This is proved by the fact that within seven months they found it necessary to increase the capital by £20,000. Thus back came the £20,000 from the very men who had received it from the company, to take up ordinary shares at £1 a share, the issue of which was confined exclusively to themselves, and which have been quoted on the market at £lO a share. If the market quotation is correct they are worth £200,000.” Amazement Expressed. The speaker questioned the manner in which the 350 per cent, dividend had been voted, and asked why the recommendations of the directors as to the ordinary share and preference dividends were not stated in clear terms in the report sent to preference shareholders. He expressed amazement at the contention put forward by Messrs. Johnstone and O’Callaghan in a circular to preference shareholders stating, “The fact that we are the chief beneficial shareholders outside the Todd interests is just the very reason why we should be re-elected as directors representing you, to enable us to keep in close touch with the transactions of the company throughout the year.” Mr. Mclntosh concluded by remarking that he had no misapprehension as to the true position. If Messrs. Johnstone and O’Callaghan were re-elect-ed, the preference shareholders’ remedies were not exhausted. The other new nominee, Mr. King, quoted Burns: “Oh, wad some power the giftie gi'e us. . . . ” If the poet had kndwn anything about oil, he would have known that the Deity would not have touched it. (Laughter.) He (the speaker) claimed to have been wrongly described to the shareholders. He was a service station proprietor, not a plumber. He promised, that if he failed to be elected, he would organise the petrol resellers among whom were an influential body of preference shareholders. Mr. Johnstone reiterated that he could not be expected to give a full account of his stewardship iu a few minutes. Mr. Fitz Gerald had stated that the effect of the judgment of the Supreme Court was a victory for the company as well as the directors. Mr. Fitz Gerald: No, for the preference shareholders. Continuing, Mr. Johnstone said he was not made a party to the case, and he therefore had no voice. The figures quoted by Mr. Mclntosh as to his and Mr. O'Callaghau’s shareholding were wrong. Actually Mr. O’Callaghan had 325 shares and he himself had 200 before the new issue on March 17. Mr. Mclntosh: I stated that they were in your own names or in trust. “I reckon I am paid about half what my services are worth to the preference shareholders,” added Mr. Johnstone. Voices: You are paid, ail right. Petrol War, Replying to criticism as to the rebate to shareholders for petrol supplies, Mr. Johnstone submitted that if the coupon system were administered it might possibly lead to a petrol war. Voices: You sold the company to the preference shareholders on the promise of the rebates. Mr.•Johnstone: At that time the other companies had not commenced price-cutting. Shareholders: Your salesmen told us there would be no war.

Mr. O'Call.'tglmn said the last; bal-ance-sheet showed beyond quest ion that tlie preference shareholders were adequately protected. The isin of the directors, as it related to tlie ordinary shareholders, was that they had made a success of tlie company.

A shareholder: With Hie assistance of Parliament.

Proceeding, Mr. O’Callagiian said what the directors and ordinary shareholders were being asked Io do was to break the agreement. He defied anyone to say that the contract with the preference shareholders hail not been more than honoured. The payment of £17,500 in dividends Io the ordinary shareholders to save the motorists of the country £3,500,000 was more than justified. As to the charge that adequate provision had not been made for reserves, the preference shareholders would find ample provision in the assets of the company in cash, oil and so on. The company was too good to wreck’. Mr. St. IT. Wynyard. of Auckland. a director, said lie would like to point; out that the interests of the preference shareholders wen- fully protected under the memorandum of association, which provided for the appointment of their own auditor, who had satisfied himself that the interests of this class of shareholders were safeguarded and that they were receiving what they were entitled to under the contract. The company had done its duty by them. If the preference shareholders wanted more than they were entitled to, that was a horse of another colour. Mr. Carey asked what changes the preference shareholders desired. No doubt the directors would endeavour Io meet them reasonably. What would the motorists of New Zealand be paying for petrol if the company was not

functioning? Most of the preference shareholders had come into the company to get cheaper petrol. If they had complaints, they should not complain to the public, but to those who represented them. Mr. Fitz Gerald: I have a dozen letters in my bag showing that they got anything but courteous treatment when they complained to the company. Mr. A. E. Ansell said the company had done what it set out to do —secure cheaper petrol for the motorists. Mr. Moss said the directors were in the position of the ostrich who hid his head in the sand. From correspondence he had received he could assure them that there was very intense feeling. They could not afford to do without the support of the 7300 preference shareholders. Jf the company went to Parliament in the name of the motorists and to save the preference .shareholders, those shareholders were now entitled to go to Parliament to ask it to inquire -what was happening since it gave the company its protection. A reference by Mr. Moss to Shylock and his pound of flesh prompted the rejoinder from Mr. Todd that Shylock did not ask for more than his contract. (Laughter,) Denial of Agreement. “I want to ask you. Mr. Chairman, If any agreement lias been made with the major oil companies.” said Mr. Moss. Mr. Todd: I definitely deny that there is any agreement; either expressed or implied. Only a mind like yours would suggest it. Shareholders: 'Ob, oh. Mr. Todd: I apologise. A good deal of co-operation had been lost by the company, continued Mr. Moss, who appealed for more generous treatment of the preference shareholders. Mr. Todd: If you wreck the company up goes the price of petrol G<l. a gallon. Mr. Moss: Not. under the present Government. Mr. F. W. Grainger said that what, the preference shareholders were not satisfied with was the 350 per cent, dividend for the ordinary shareholders. Mr. Todd: It. was three years before we got a dividend. Mr. A. McKellar. of Christchurch, preference shareholders’ auditor, said it had not been possible to pay the rebate coupons on Hie basis of the articles of association. The directors, lie could assure the preference shareholders. liad loyally carried out their contract, with flii’in. He had never been refused any Information lie had sought. Mr. Moss: Mr. MeKellar's duties arc limited under the constitution of the company.

Mr. P. It. Harvey said Hie directors were in the position of ostriclies. He asked the chairman to state definitely whether tlie preference shareholders would receive any further consideration. If the company did not do something for them it would 'be up against it.

Mr. Todd: If it: comes to throats, well we know how to lake care of that. The books and the figures of the company arc before the Government all the time.

Mr. Harvey: If tlie company does not do something. . . . Mr. Todd: Ladles and gentlemen, this meeting is closed. I won't listen to blackmail and threats.