Paperlinx investors including Blue Pacific and the PIGS group are questioning the board over payments of $850,000 to a top shareholder for consulting work, with PIGS calling for chairman Robert Kaye to resign.
Laurence Rodny, who owns 9.1 per cent of the embattled paper merchant and was until July its second biggest shareholder, has been employed as a property consultant for the past two years through his Communications Power company.
The merchant told ProPrint Rodny is employed in an “arms-length arrangement providing property management advice in regard to Paperlinx’s commercial property ownership and leasing arrangements globally”.
[Related: The ups and downs of Paperlinx]
New York-based investment firm Blue Pacific has released an open letter questioning the arrangement and demanding documentation of Rodny’s credentials to provide property consulting services, and examples of relevant experience.
It also wants to know how the ‘market rate’ for the services were determined, if Paperlinx obtained quotes from alternative firms, details of the negotiation process, and if anyone else was performing similar services.
It also asks if any prior personal relationships exist between Rodny and any members of Paperlinx’s board or management ‘and if so, how did the board manage any potential conflicts of interest?’
Blue Pacific points out that board members have a duty to exercise their powers ‘for the best interests of the company’ and to ‘not to improperly use your position to gain an advantage for yourself or someone else’.
“Without adequate answers to the questions highlighted above, we believe it is unclear whether the board of Paperlinx is fulfilling its duties to shareholders,” it says.
Gaby Berger, acting convenor of shareholder advocacy group PXUPA Investor Group Supporters (PIGS), says Rodny is getting ‘special treatment’ without sufficient explanation.
Berger says while Kaye has done the right thing ending Paperlinx’s ‘overseas adventures’, he must ‘face the music’ for poor corporate governance on this issue and immediately resign.
“It is a lot of money for Rodny to be making when shareholders have lost $2bn over the past 10 years. We are owned an explanation and have not been given one,” he says.
The payments were mentioned in this year's annual report, but not in the FY14 report.
Blue Pacific last month demanded Paperlinx resolve the longstanding hybrid shareholders issue and proposed a share swap plan that would give them 80 per cent of the company. Paperlinx so far has made no response.
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