SPK- Spark NZ (TELCO)

[mikelee]

happy with the annual dividend but really disappointed with the SP...finally hit $5 earlier but didn't last long at all
can't believe how resilient AIA is by comparison

[bull....]

happy with the annual dividend but really disappointed with the SP...finally hit $5 earlier but didn't last long at all
can't believe how resilient AIA is by comparison

spk has a habit of declining after div , the last time it took a while to get back to pre - div levels. but this time things have changed a bit due to rising bond yields so it may be harder this time as spk is a bond proxy stock

[mikelee]

do you think it might have to do with Sky TV's recent product announcement too? I doubt anyone can compete with Spark's share of the corporate business, even Air NZ switched from Vodafone to Spark a few years ago.

[Snoopy]

Planning to buy more SPK than any other share, just waiting for the right time.

Some choose when to buy their Spark shares. Others, like directors for example, have less choice. Their buying and selling is restricted to a limited window, after both the full year and half year result release dates. But how many shareholders know the Spark directors are 'forced' shareholders, no matter what they may think about the prospects of the company? This was first mentioned in AR2017 p90:

"All non-executive directors are encouraged to hold Spark shares. Subject to personal circumstances (that should be discussed with the Chair, or in the case of personal circumstances of the Chair, with the Chair of the Audit & Risk Management Committee, as appropriate) there is an expectation that each non-executive director will hold an amount of shares equivalent to the non-executive director base member fee to be purchased over a three year period from the date of their appointment or in the case of directors appointed before 1st July 2017 over a three year period from that date."

Using this information I thought it would be interesting to draw up a list of the non-executive directors and see how they sit on the ENU shareholder scale, where E stands for 'Enthusiastic', N stands for 'Neutral' and 'U' stands for 'Underdone'. AR2020 p103 shows Chair fees of $368,700 and non-executve director fees of $145,200. The Spark share price closed today at $4.75.

That means for a 'neutral' position, a non-executive director must hold: $145,200 / $4.75 = 30,568 shares

And to be neutral, the Chair must hold: $368,700/$4.75 = 77,621 shares

Lined up against these standards, how is the board doing? Because the share price goes up and down, for the purposes of this exercise I will describe any holder of shares within 10% of the 'neutral number' as 'neutral'.

Number of Spark Shares held by Directors (AR2020)

Director	Enthusiastic	Neutral	Underdone
Alison Barass	37,716
Paul Berriman			20,000
Warwick Bray			0
Pip Greenwood		33,325
Ido Leffler		32,000
Charlie Sitch		32,729
Justine Smythe (Chair)	375,201

Good marks for Justine Smythe and Alison Barass, showing their enthusiasm for the company via their shareholdings.

Pip Greenwood, Ido Leffler (joined the board 2014) and Charlie Sitch (joined the board 2011) are playing the game by the book, with their minimum holdings. Pip Greenwood did not join the board until April 2018. By the rules she had until April 2021 to accumulate a satisfactory holding. So I do give Pip some bonus points for 'getting in early'.

Paul Berriman has been on the board for ten years. So it isn't a good look for him to be snubbing the minimum shareholding requirement. Warwick Bray has the excuse of only joining the board in September 2019. By the director share accumulation rules, he would not be expected to finally accumulate his required holdings until September 2022. But he seems in no hurry to accumulate his Spark shares, which is not a good look.

So there you have it. Under ordinary circumstances it would be good to see so many of the board with 'skin in the game', overseeing the business with their 'owner's eye'. However, having read and understood the minimum share ownership requirements for non-executive directors at Spark, the 'Enthusiasts' are cancelled out by those 'Underdone'. Overall director engagement with Spark, as expressed via shareholdings of the non-executive directors, looks a bit ho hum. But I will be polite and call it 'neutral'.

SNOOPY

[850man]

Snoopy - a bloody good question at the shareholders meeting, why the directors have so little personal comittment in the company they are running.

[Snoopy]

Snoopy - a bloody good question at the shareholders meeting, why the directors have so little personal comittment in the company they are running.

It is a tricky one. The Chair, Justine Smythe, has nearly $1.5m of her own cash in Spark shares. That sets a good example to the rest of the board, and I would imagine an investment of that size would 'focus the attention'. Mind you with an annual cash consideration of $375,000 from Spark, Justine probably has a bit more spare cash to invest than most, including those regular director paupers who have to make do with just $145k per year.

If I didn't know about the policy of demanding directors to hold shares, I would have been quite pleased with the level of director shareholding. $150,000 worth of shares is not a trivial amount of skin to have in the game for a 'run of the mill' director. But somehow, seeing a shareholding level is forced, diminishes the public commitment of a director in my eyes.

Personally I think it is more important for the 'executive team' to have skin in the game rather than the 'governance team'. There is an argument for non-executive directors to be well remunerated, and Spark directors certainly are that, but not have any shares. That allows the governors of the company have one level of separation from management. Having skin in the game can also give you blinkers.

SNOOPY

[winner69]

It is a tricky one. The Chair, Justine Smythe, has nearly $1.5m of her own cash in Spark shares. That sets a good example to the rest of the board, and I would imagine an investment of that size would 'focus the attention'. Mind you with an annual cash consideration of $375,000 from Spark, Justine probably has a bit more spare cash to invest than most, including those regular director paupers who have to make do with just $145k per year.

If I didn't know about the policy of demanding directors to hold shares, I would have been quite pleased with the level of director shareholding. $150,000 worth of shares is not a trivial amount of skin to have in the game for a 'run of the mill' director. But somehow, seeing a shareholding level is forced, diminishes the public commitment of a director in my eyes.

Personally I think it is more important for the 'executive team' to have skin in the game rather than the 'governance team'. There is an argument for non-executive directors to be well remunerated, and Spark directors certainly are that, but not have any shares. That allows the governors of the company have one level of separation from management. Having skin in the game can also give you blinkers.

SNOOPY

Snoopy - the red bit is so true

Having 'skin in the game' can diminish ones 'independence' (if they are an independent / non-executive director)

Like 'what's in it for me' instead of 'what's best for stakeholders' (see I didn't say just shareholders)

[percy]

Snoopy - the red bit is so true

Having 'skin in the game' can diminish ones 'independence' (if they are an independent / non-executive director)

Like 'what's in it for me' instead of 'what's best for stakeholders' (see I didn't say just shareholders)

Think of shareholders with skin in the game,or on the line.and you will find their companies are the most successful.
.
Mainfreight.
Freightways,
Ebos
Push pay holdings.
Delegats.
Hallensteins Glasson.
Heartland Group Holdings.
Ryman.
Turners.
Briscoes.
Berkshire Hathaway.
Apple
Tesla
About the first thing I look for when investing.Directors with skin on the line.
I try to avoid companies where directors have small or no holdings.

[Snoopy]

Snoopy - the red bit is so true

Having 'skin in the game' can diminish ones 'independence' (if they are an independent / non-executive director)

Like 'what's in it for me' instead of 'what's best for stakeholders' (see I didn't say just shareholders)

I am thinking back now to the Telecom days before it split into Chorus and what is now Spark. Wasn't there a 'kiwishare' held by the government that could have been used to look after non-shareholder stakeholders? I don't recall the government doing much with it 'in the day'. But I guess it was always there 'as a threat' should the board choose to take advantage of their monopoly position. Was the kiwishare tied up with local free calling and inflation linked maximum lines charges? Funny, I can't remember what happened to that Telecom kiwishare. Can anyone recall?

I want to 'have my cake' and 'eat it' with director shareholdings. I am quite happy to see directors buy shares on market, as a sign of genuine confidence in the company. But I want them to consider the wider industry picture too and not have their decision making skewed simply because they are shareholders.

SNOOPY

[BlackPeter]

I am thinking back now to the Telecom days before it split into Chorus and what is now Spark. Wasn't there a 'kiwishare' held by the government that could have been used to look after non-shareholder stakeholders? I don't recall the government doing much with it 'in the day'. But I guess it was always there 'as a threat' should the board choose to take advantage of their monopoly position. Was the kiwishare tied up with local free calling and inflation linked maximum lines charges? Funny, I can't remember what happened to that Telecom kiwishare. Can anyone recall?

I want to 'have my cake' and 'eat it' with director shareholdings. I am quite happy to see directors buy shares on market, as a sign of genuine confidence in the company. But I want them to consider the wider industry picture too and not have their decision making skewed simply because they are shareholders.

SNOOPY

The "new"Kiwi share agreement (now 20 years old):
https://www.beehive.govt.nz/release/...are-obligation

and what happened with it:
https://teara.govt.nz/en/cartoon/256...com-kiwi-share

Kiwishare.JPG

Actually - I think it is legally still in place in areas where customers don't have the option yet to connect to fibre ...