Paul McBeth is the editor of The Bottom Line and Curious News, having worked at BusinessDesk for 15 years. He’s owned shares of Rakon since January 2024 and last bought shares on Aug 1. He plans to abstain from voting at this week’s annual meeting.
Rakon should be one of New Zealand’s commercial treasures.
The firm makes fancy high-tech components that plug into some of the sexiest industries going – think space, semiconductors, defence, telecommunications.
And while it’s never been far from the headlines in its 19 years as a publicly listed company, the glowing reports on Rakon’s real successes have tended to be overshadowed by the gripes and grizzles of a company that seemingly fails to live up to its potential.
The latest showdown is a case in point.
Former chief executive Brent Robinson threw the cat among the pigeons when he and his family – which founded the firm back in the 1960s – unexpectedly pulled their support for Rakon’s chair-elect Mark Bregman and independent directors Lisbeth Jacobs and Jon Raby.
Robinson had put his hat in the ring to take the chair when Lorraine Witten calls it quits at the conclusion of their annual meeting on Friday, but was rejected by Rakon’s independent directors weighing up the candidates – although they did want to keep him on the board to tap his deep industry experience and the fact that he represented a substantial ownership bloc in the family’s near-20% stake.
But wait, there’s more
It was perhaps more substantial than they thought, given Taiwan’s Siward Crystal Technology – which injected a very helpful US$10 million into the company in late 2016 – is backing the Robinson family, as is the very vocal long-term shareholder Mike Daniel, giving the bloc a near-39% voting stake.
Given the past five annual meetings have only seen between 43% and 59% of the company’s 229.8 million shares being voted, you’d be forgiven for saying the writing is clearly on the wall – something Jacobs and Raby obviously noticed in throwing in the towel and casting some shade the way of the Robinsons and Siward in saying it’s untenable for them to work in the new governance environment and with the controlling interests.
And while it might seem like a fait accompli, that hasn’t deterred the New Zealand Shareholders’ Association and its chief executive Oliver Mander from filing their own resolutions for the meeting to dump Robinson and re-write Rakon’s constitution to exclude large voting blocs of 30% or more from voting on the election of independent directors.
The association has already made its views known about large shareholders voting on independent directors, having seen off an attempt by PGG Wrightson’s cornerstone investor Agria to roll the rural services firm’s independent directors and put in its own group of directors who definitely weren’t aligned to the Singaporean company.
Robinson bristled at the proposal, calling it a governance misstep and at odds with the NZ Shareholders’ Association’s own mission of advocating for investors and promoting fair and transparent capital markets by weakening the principle that ownership should come with voice.
The majority of Rakon’s board – currently made up of Witten, Bregman, Jacobs, Raby, Robinson and Siward’s Jung Meng Tseng – are recommending shareholders back the constitutional change, if not Robinson’s dumping, though no prizes for picking who dissented on that boardroom resolution.
And while there’s been a bit of scaremongering that if Robinson gets his way – as seems highly likely – Rakon will find itself lacking the requisite number of independent directors and suffer the consequences of NZX’s RegCo supervision arm, the chances of the engineer Robinson not having people waiting in the wings seems vanishingly small.
It’s easy to have sympathy with Robinson’s view that Rakon’s board needs a greater understanding of the sectors it operates in and that there’d been a procedural overreach that was slowing down decision making – most evident in the information void that developed during the achingly slow takeover that failed to eventuate.
Lest we forget
Still, it’s just as easy to recall the protracted battles shareholders had with the Robinson family through the 2010s, culminating in the ousting of Darren Robinson from the board in 2016 led by a strident John Hawkins when he chaired the NZ Shareholders’ Association.
The major bone of contention was the feeling that Rakon’s founding family continued to treat the manufacturer like a family business despite listing it back in 2006 and taking other people’s money to try to capture the global GPS opportunity of the time, before the explosion of smart phones upended that market.
And what made things more galling at the time was the bonuses paid to the Robinson brothers – signed off by the board – when there was meant to be an executive and director pay freeze until Rakon hit $25 million of underlying earnings, something later clarified to mean just the base remuneration.
In many ways, the current debate remains the same.
How can Rakon tap into the nous and experience of its founders and cornerstone shareholders, without leaving the other 4,300 or so shareholders feeling as though they’re outsiders in an investment they obviously want to succeed?
Because irrespective of who ends up holding the tiller, Rakon’s owners – big and small – want the company to live up to its potential of being a world-class manufacturer.
Image from Mister rf via Wikimedia Commons.
