Fletcher Chair resigns but directors retain huge fees despite staggering loss

Written By: - Date published: 4:34 pm, February 14th, 2018 - 123 comments
Categories: business, capitalism, economy, Economy, Financial markets, housing, kiwisaver - Tags: , ,

Sir Ralph Norris laughing all the way to the bank

Fletcher Building, as telegraphed by their share trading halt last week, today announced further dire losses from their Building and Interiors unit that sent their shares plunging another 12% to $6.87.

The company said it was suspending the shareholder interim dividend and was in breach of covenants to its banks and bond holders.

But it seems the company’s seven directors will keep most of their enormous fees.
Chairman Sir Ralph Norris announced he would fall on his sword, following the forced resignation of former CEO Mark Adamson in March when the company made the second announcement of problems at the Building unit.

At the third announcement in October, Norris apologised to shareholders, saying directors took responsibility and would therefore take a 20% cut in the $200,000+ directors’ fees with Norris’ $426,000 fee taking a similar trim.

Norris has acknowledged some personal responsibility for the problems by resigning. He has overseen the Building unit lose close to $1 billion in two years, but there was silence on whether the directors should take another haircut on fees. When contacted today, Norris refused to comment about the need for a further cut.

The latest announcement of further losses in the building unit has angered shareholders and analysts.

The losses are bad enough but Fletcher has seriously damaged its credibility by having four goes at getting this right. The fact that the board failed to get on top of this problem that was exposed over a year ago reveals their collective failure.

At the analysts briefing after today’s announcement, Citi Research Equities analyst Simon Thackray queried how it was that the company said in October that accounting firm KPMG had done a “comprehensive” review but then more losses had emerged.

“I’m trying to understand how KPMG were so emphatic in October,” he said.

Ironically, most of the losses — $410 million – have stemmed from the controversial Sky City Convention Centre, where the John Key-led National government traded off laxer gambling rules in exchange for getting the centre built. Questions were raised also about the openness of the tender process that Fletcher Building won.

The Building + Interiors division lost $292m in the June 30, 2017 year but a further $660m of losses are now projected in the current June, 2018 year.

Norris blamed grossly wrong quantity surveyor estimates, rising building costs and the flow of communication from management to the board as reasons for losses.

Fletcher’s banks, owed $1.3 billion, have agreed to an interim waiver on breached banking covenants, but you can be sure they will demand higher interest rates. Arrangements will be reviewed in June.

However, Fletcher may have more problems over another $1.13 billion owed to a US Private Placement syndicate. There are three tranches of this debt and over half of the lenders have to agree to the waiver of the breached covenants.

New Fletcher CEO Ross Taylor, who exuded smiles and confidence at a news conference despite accepting the ceo role hospital pass, gave all sorts of assurances that everything has hunkey dorey – no asset sales had been demanded by banks, no new capital was required and while debt lines were pretty fully drawn other than working capital, cash flow was okay.

He wasn’t so smiley about the million Fletcher shares he was forced to buy as part of getting the job and now under water.

Mark Lister, head of private wealth research at Craigs Investment Partners, said the Fletcher share price plunge could have been much greater if the company had planned a big capital raising to rectify its debt problems, as some in the market had suggested.

“It was a good result considering it could have been much worse than that if they had had to do a dirty great big capital raising,” he said.
Taylor said that other than completing existing projects, the B&I unit was getting out of the business. That means that that unit within the Fletcher conglomerate is now worse than worthless.

How a building company has managed to lose money in what analysts say has been the biggest construction boom in nearly a century is mind boggling and really the whole of the Fletcher board should resign – not just forego all their fees.

Before today, Fletcher shares were already down over 23% on a year ago in a bull market that saw the NZX rise 22% in 2017. Just two years ago Fletcher was the country’s largest listed company by value. Now, it is well down the chain.

Share market commentator Brian Gaynor of Milford Asset Management said Fletcher’s board was too shallow and wide, full of lawyers and accountants while lacking construction industry knowledge. He said decisions to move from being an integrated conglomerate to a diversified one, with purchases of international companies Formica and Crane Group, were ill-advised.

Norris denied lack of construction industry knowledge and noted Taylor, who is not on the board, has expertise in this area.

(Simon Louisson is a retired journalist who reported for The Wall Street Journal, AP Dow Jones Newswires, New Zealand Press Association and Reuters and briefly was a political and media adviser to the Green Party.)

123 comments on “Fletcher Chair resigns but directors retain huge fees despite staggering loss ”

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  1. DoublePlusGood 1
    14 February 2018 at 4:52 pm

    I really have to get into this Board of Directors business. Sweet gig, you can earn hundreds of thousands of dollars doing very little, and no consequences if you fail!
    (Well, no consequences for *you*)

    • paul andersen 1.1
      14 February 2018 at 10:05 pm

      what do you think english is going to do? go farming(yeah right)

    • smilin 1.2
      17 February 2018 at 11:19 am

      So true real gravy
      How does Norris get into building after being a flying fig for Air Nz
      And another of Keystrokes dodgy deals in the mix
      Surprising na, just more of the reasons for our colossal debt from his bs management

  2. Zorb6 2
    14 February 2018 at 5:30 pm

    Norris on $426,000!Good work if you can get it.
    Mind you it must be the current market rate for,’talent’.

  3. McFlock 3
    14 February 2018 at 5:45 pm

    Now, now, the reason they are paid so much is that they’re all highly trained and experienced people who can captain the ship away from the rocks of market uncertainty and avoid the foolish errors of less experienced professionals 🙄 /sarc /sarc /puke

    • Leonhart Hunt 3.1
      14 February 2018 at 8:56 pm

      I agree with your sarcasm, but Fontera CEO is on 8.6mil per year…. that’s 100 times the avg kiwi income, its obscene.

      • KJT 3.1.1
        15 February 2018 at 2:57 am

        He does 100 times the work of an average New Zealander?

      • savenz 3.1.2
        15 February 2018 at 11:18 am

        Not only the grossly inappropriate 8 million+ in fees to a B rate CEO from Holland but also they make the farmers pay into a slushy fund full to the brim of cash for ‘innovating’ or some crap like that, but when anyone want’s to do anything that will grow or transform with the slushy fund, nope, apparently management are just siphoning it off somehow.

        That’s why Fonterra is in the doldrums – they have the money to what ever they want, but management are too stupid/lazy/ineffective to actually transform and go from milk powder to high value items apart from in a small way. Their main focus is on cost cutting and volume which is completely out of touch with modern consumer focused, high skilled, agile business.

        Fonterra managers are just cracking the whip and saying “make more milk” in some third world, third rate ideology, lobbying the government to not adjust to climate change and environmental challenges, and therefore closer and closer to becoming less and less able to survive in the modern world.

        Whenever they do do a project they make everything worse than 10 years ago. That’s how crap Fonterra managers have become under the new CEO who fails to understand the company, NZ or the culture.

        And that’s what has happened to Fletchers. They have done nothing as managers except collect fees and networking (trusting and networking with John Key has cost them millions by the look of it as Sky City),while Fletcher fails to adjust to modern business practises and keep a highly skilled agile workforce. (Nope do NOT mean, cheaper, fakery skilled, dinosaur workforce that would not be able to evaluate a new idea, without KPMG, 20 accountants, 40 line managers and 3 lawyers wiping their bums and taking years to do it).

        Guess what. Business is changing and fast! Dinosaur executives and managers that spend all their days at lunches and hire their mates at the big 5 and rely on tenders organised by friends like JK, are being caught out and losing billions.

      • OncewasTim 3.1.3
        15 February 2018 at 1:33 pm

        And somebody here, the other day claimed Fonterra was a co-operative. LOLs as they say.
        Unless dairy farmers are all masochists
        They certainly swallowed a heap of cowshit when it was restructured for wideboy sharemarket trading.

    • SpaceMonkey 3.2
      15 February 2018 at 7:39 am

      Ha! While preparing to accelerate through windows of opportunity as they arise. 😂

  4. patricia bremner 4
    14 February 2018 at 6:46 pm

    Why are we just hearing this now? It has been brewing for 2 years. Did I miss reports?

    There is a possibility of it hitting the banks hard, and it has already impacted plenty of ordinary lives.
    This should be looked at forensically. Why are they not liable for such compounded losses.
    Australia has been known to rake back all earnings over 5 years.

    No wonder Twyford said he would be working with mid range developers.

  5. UncookedSelachimorpha 5
    14 February 2018 at 7:09 pm

    Imagine how badly they would have done if they had only had a $350k p.a. chairman! Money well spent, every penny.

    • cleangreen 5.1
      14 February 2018 at 8:58 pm

      Norris had no ‘talent’ & he should fall on his sword and be stripped of this salary as he was given a greasy golden spoon by the greasy national party on all contracts and fucked it up still.

      Tar and feather the man.

  6. Ad 6
    14 February 2018 at 8:49 pm

    Norris was one of NZs top 5 corporate leaders across Australasia.

    He has nearly destroyed NZ’s biggest listed company.

    He’s lost his $420kplus job.

    He won’t be doing lunch in this town again.

    He’s unemployable.

    He’s socially fucked.

    And he could potentially go the way of Bruce Judge or Graham if the company splits up and shareholders really seek revenge.

    Norris is now on our corporate wall of infamy.

    He can keep the change.

    • Drowsy M. Kram 6.1
      14 February 2018 at 10:16 pm

      It’s ‘big bucks’, not “change”, that Sir Ralph gets to keep – his ilk are risk averse when it comes to personal wealth. But maybe the ‘awfulness’ of his current situation is a consideration when deciding to award CEOs their big bucks in the first place.

      CEOs come and go, but the only way for collective salaries of CEOs is UP.

      http://fortune.com/2016/07/15/ceo-pay-2

    • xanthe 6.2
      15 February 2018 at 9:28 am

      On the contrary Norrris has been happily claiming astonishingly large remuneration and running things into the ground for ever CBA, fonterra, Air new zealand, team nz . I see no reason why he cannot just move on to destroy another

    • infused 6.3
      15 February 2018 at 10:12 am

      This is why CEOs are paid good money.

      They have the contacts, and generally very good knowledge.

      But if they fuck up, that’s their career gone.

      • tc 6.3.1
        15 February 2018 at 11:55 am

        The only one I’ve ever seen that happen to was Gattung and that’s because she was stupid enough to admit the reality of telco marketing tricks in public.

        You’ll probably find Ling was the last competant CEO they had as he did a pretty good job to extricate them from the shambolic spark (nee vector) arena roof situation they found themselves in.

        Once he stabilised what he could he shot through and Adamson took the poisoned challice till his eventual demise as the rot set in long before he got to the top gig.

        Adamson did the obvious things in the badly managed formica division (as fletchers had been parking it’s dead rotting wood in the upper levels) …..a trick that can’t be repeated in the NZ building division

        • ropata 6.3.1.1
          15 February 2018 at 12:02 pm

          Time to bring in a hired gun and start handing out pink slips.
          (could be a job for smiling assassin John Key)

          • tc 6.3.1.1.1
            15 February 2018 at 1:09 pm

            that’s one of the reasons they’re in such deep trouble as they purged those pesky voices of dissent who were the experienced hands raising the alarm.

            Ling did his best to appease the various factions but it’s a hospital pass of a gig now.

            • ropata 6.3.1.1.1.1
              15 February 2018 at 2:40 pm

              That is a cultural issue then. Management who only want to hear good news so that they can lie to the shareholders. When SHTF they pass the blame back down to their staff

      • savenz 6.3.2
        15 February 2018 at 12:41 pm

        “But if they fuck up, that’s their career gone…” I think you will find, they just continue in NZ and the same names just keep coming up in every company and corporation. Names like Paul Rebstock, Shiply (Mainzeal) etc

  7. Johnr 7
    14 February 2018 at 9:38 pm

    I’m astonished that they’ve lasted so long. I rubbed shoulders with them in the early 70’s and they were a cowboy outfit then. My son subbed to them 2 years ago and nothing has changed.

    However it is not unique to them. Having been an executive in two public company’s and having to present papers to a board for budgets and capital expenditure, I have no faith in their competance. They might have dollar signs tattooed on there eyeballs, but most of them couldn’t find their way to the boardroom if it wasn’t for the smell of lunch emanating from the adjacent kitchen.
    Never ever seen a board member walk around the plant to understand how the place works.
    And, after gaining permission for capital expenditure with the appropriate ROI timescale I’ve never been questioned at the end of that period if I achieved the stated objective.

    • Ad 7.1
      15 February 2018 at 7:30 am

      You sound like you have great tales from the industry to tell.

      The more Fletcher stories come out the more I wonder why Tommy Parker jumped last month from tier 2 head of all capital at NZTA to Fletchers.

      • greywarshark 7.1.1
        15 February 2018 at 10:27 am

        T Parker – perhaps wanted to park in a better high-rise parking building free!
        The answer is probably money made him move, and moving in the right circles that of course go round and round and getting into them is not easy and should be embraced when offered, as they are so smooth and symmetrical.

      • tc 7.1.2
        15 February 2018 at 11:59 am

        $$$$$$$$…..everyone has a price.

      • savenz 7.1.3
        15 February 2018 at 12:41 pm

        NZTA to Fletchers – one screw up to the next.

  8. Sacha 8
    14 February 2018 at 9:47 pm

    This debacle has stolen money from heaps of small Kiwisaver investors. I agree the whole Board should go. Back-slapping bozos.

    • Antoine 8.1
      14 February 2018 at 11:39 pm

      >This debacle has stolen money from heaps of small Kiwisaver investors

      And given it to lots of small Sky City investors. I’m not sure that the world is a much worse place overall…

      A.

  9. KJT 9
    14 February 2018 at 9:57 pm

    “Personal responsibility”?

    • paul andersen 9.1
      14 February 2018 at 10:07 pm

      dont be silly, thats only for poor people

      • Antoine 9.1.1
        14 February 2018 at 10:51 pm

        Or the owners of a private business

        • McFlock 9.1.1.1
          14 February 2018 at 10:55 pm

          Only limited liability there.

          • Antoine 9.1.1.1.1
            14 February 2018 at 11:38 pm

            You can still lose quite a bit

            • McFlock 9.1.1.1.1.1
              14 February 2018 at 11:53 pm

              Not as much as most investors. After all, shareholders don’t pay themselves an hourly or weekly rate in addition to dividends they might get from net profit.

              And then there’s family trusts to further shield your previous profits from the business.

              whereas poor people lose everything

              • Antoine …
                15 February 2018 at 12:56 am

                Yes, you can shelter some money through limited liability structures, trusts, the provisions of the bankruptcy regime etc. You know that if these protections weren’t available, less people would be willing to start a business. But perhaps you hate capitalism so this wouldn’t be a problem for you. In which case, shrug, not much more I can say about that.

                > whereas poor people lose everything

                Not quite sure where you’re going with this and I don’t want to enter into a ‘who can lose out the most’ race so I’ll leave it.

                A.

                • McFlock …
                  15 February 2018 at 1:16 am

                  The ones more likely to fail would be less likely to take a punt.

                  Why do you think creditors should subsidise the poor business decisions of others?

                  • KJT …
                    15 February 2018 at 2:52 am

                    “Investors” knowingly take the risk at the chance of big gains.

                    Workers and sub contractors, however.

                    • Sacha …
                      15 February 2018 at 7:08 am

                      How many people with a Kiwisaver account knew Fletcher was part of their exposure?

                    • Antoine []
                      15 February 2018 at 7:41 am

                      Is anyone’s Kiwisaver much affected by a moderate fall in Fletchers shares? Should be a small part of a well diversified portfolio

                    • KJT …
                      15 February 2018 at 4:13 pm

                      KiwiSaver invests people in the financial ponzi scheme, in the mistaken belief that putting money in hedge funds and derivative’s, will result in enough resorces in our society to feed and house the elderly in future.

                      Of course raising taxes now, to invest in infrastructure, education, housing and sustainable development, is much more likely to achieve the required result.

                      Privatising retirement provision is likely to end in the same inadequate shambles, as all the other privatisations’.

                  • Antoine …
                    15 February 2018 at 3:20 am

                    You gotta be careful who you lend to. Is part of life.

                    • Antoine …
                      15 February 2018 at 3:25 am

                      I do feel sorry for the subbies though. I reckon theres something fundamentally wrong in how subbies are treated. Should be higher up the ladder in a liquidation perhaps??

                    • McFlock …
                      15 February 2018 at 11:36 am

                      How far would you get supplying trades on a cash up front basis?

                    • Antoine …
                      15 February 2018 at 11:41 am

                      That’s what I was saying about subbies having a bit of a raw deal

                    • KJT …
                      15 February 2018 at 3:15 pm

                      Not paying people who have done work for you, without a good reason, should be a criminal offence.
                      So many builders and subbies have gone broke.

                    • Antoine …
                      16 February 2018 at 1:33 am

                      I had more in mind that subbies would come ahead of other creditors. I don’t think you can really put bankrupts in jail for failing to pay their debts. That’d be back to the 19th century

                      A.

                    • Graeme …
                      16 February 2018 at 8:25 am

                      Getting goods or services for payment 20th month following and not paying for at least 3 months, or just not paying at all, is how a significant part of NZ operates. It’s bullshit and holds the economy back by diverting cashflow to the few.

                      This isn’t just outfits and individuals that are going tits up, it’s general practice, ie Fontera.

                      It’s also theft. But under our law it’s a civil matter, not criminal. These lovely people who don’t pay are just as much anti-social dross as the hoods that shoplift, burgle houses or download torrents, just they can do it with impunity, and should face the same consequences.

                      There are a people driving new Range Rovers around town here who do it by not paying subbies, and have done it repeatedly and for large amounts. They get away with it because there’s no consequences and a huge turnover of tradies through the town who don’t know the history of the people they work for.

                    • Antoine …
                      16 February 2018 at 10:47 am

                      > Getting goods or services for payment 20th month following and not paying for at least 3 months, or just not paying at all, is how a significant part of NZ operates.

                      I’ve never encountered this personally but I can believe it happens, and it sounds incredibly annoying and problematic

                      A.

              • KJT …
                15 February 2018 at 2:56 am

                Shareholders are the ones who support so many businesses being “leveraged” so they can get dividends. We saw National doing it with SOE’s to pretend there was no deficit.

                Never see them paying them back in bad years, or to pay creditors such as unpaid staff, though.

          • KJT 9.1.1.1.2
            15 February 2018 at 2:51 am

            Small businesses can’t get credit without personal guarantees.

  10. Muttonbird 10
    14 February 2018 at 10:29 pm

    Maybe the dodgy tender process for the dodgy convention centre is why John Key quit. How can you lose $410m on a building which costs $430m?

    • Graeme 10.1
      16 February 2018 at 8:38 am

      Pretty easy by the look of things.

      A couple of previous examples;

      Air New Zealand’s Korean adventure in 90’s, flew lots of Koreans to NZ and back and didn’t get paid, all the losses were shifted into a subsidiary (Mt Cook Group) which was then ‘restructured”

      A construction company that got a contract to build one of the blocks in the HIlton complex at Kawarau Falls. Went tits up before the roof was on owing Placemakers and others millions. There was evidently some contention over whether the contract was supply and build or labour only. But that’s only one of many rumours about where the money went on that development, which is another story in itself.

    • Colin Espiner 10.2
      23 February 2018 at 3:31 pm

      Muttonbird, see my response to this below. The tender process for the building contract was in no way ‘dodgy’ and had nothing whatsoever to do with the government of the time. I think people are assuming that because the Crown ran a tender process to decide which developer would be chosen to build the NZICC (which SKYCITY won, and the Auditor-General criticised the process the then-government followed) they also ran the process to find a building contractor (Fletcher). That’s not the case.

      Cheers

      Colin

  11. Antoine 11
    14 February 2018 at 10:49 pm

    LOL these guys are heroes for building cut price buildings for everyone

  12. AB 12
    14 February 2018 at 10:51 pm

    If we blame boards of directors for debacles like this, then we have to praise them (and allow them to be richly rewarded) when companies do well.
    I’m inclined to do neither, because I’m not convinced they have much effect for either good or ill.
    Probably Fletchers would have stuffed up whoever was on the board, and in previous successful years they might have done just as brilliantly if the board consisted of 6 white rabbits in top hats.
    In the world of business, more deluded bollocks is talked about ‘leadership’ than anything else.

    • Draco T Bastard 12.1
      14 February 2018 at 11:01 pm

      If we blame boards of directors for debacles like this, then we have to praise them (and allow them to be richly rewarded) when companies do well.

      They are richly rewarded. The problem is that when they fuck up they’re still richly rewarded.

      I’m inclined to do neither, because I’m not convinced they have much effect for either good or ill.

      Then, in your opinion, why do they exist?

      Probably Fletchers would have stuffed up whoever was on the board, and in previous successful years they might have done just as brilliantly if the board consisted of 6 white rabbits in top hats.

      Possible but nearly impossible to prove. About the only way is to get rid of the capitalist hierarchy and turn it into a cooperative and see if that works better.

      In the world of business, more deluded bollocks is talked about ‘leadership’ than anything else.

      True.

      • AB 12.1.1
        15 February 2018 at 11:04 am

        Draco
        I’d guess it’s likely that people in low- to mid-level operational roles at Fletchers have known for some time that there were issues. Probably they didn’t appreciate the scale of the total aggregate effect, but they were probably aware. The common problem for organisations is that there is no mechanism for such awareness at the ground level to trigger proper remedial action. In fact, internal systems and habits such as performance review processes and the need to ‘manage upwards’ through disseminating only positive news, often act as perverse incentives that discourage fixing things that are broken. This seems to me to be a feature of authoritarian/totalitarian hierarchies such as private corporations and communist dictatorships. It would indeed be very interesting to see if workers electing ‘leaders’ for a limited period only, then cycling them back into operational roles, resulted in something better.

        As to your question: “Then, in your opinion, why do they exist?”
        Boards are essentially money-siphoning instruments that allow socially well-connected rich people to extract money from productive enterprises that they know little about. They achieve this by offering nothing more that fairly trite, generic truisms about business management and calling it ‘governance’.

  13. Exkiwiforces 13
    15 February 2018 at 12:01 am

    Sir Ralph Norris should’ve stuck to Banking, anyway the Fletchers crash over here with a 7.1% drop on the ASX and its the talk of the town atm. I’m hoping they drop further to under $5 dollars Aus or further a share before I buy up.

  14. adam 14
    15 February 2018 at 12:54 am

    Who cares, so capitalist fill their own back pockets – what’s news in that? It happens all the time.

    People will lose their jobs, well guess what, NZ is awash with working people getting shafted.

    As far as I can see this news is designed to shaft any wage negotiations, or any push to getting better conditions.

    Same utter crap from a incompetent class of ideological hacks and wreckers. Who then have the gall to smash working people in the face with shit wages, overpriced houses, and expensive food.

    Time we were rid of this class.

    • Antoine 14.1
      15 February 2018 at 12:58 am

      > People will lose their jobs

      And people, perhaps the same people, will get new jobs. Stuff still needs to get built.

      > As far as I can see this news is designed to shaft any wage negotiations, or any push to getting better conditions.

      [head scratch] Don’t know what you mean. They lost money and they have to fess up and deal with the consequences. I don’t see where ‘design’ comes into it.

      A.

      • McFlock 14.1.1
        15 February 2018 at 1:21 am

        And people, perhaps the same people, will get new jobs.

        Right there is the callousness of the tory fuckwit.

        People will lose jobs. Some of them will gain new jobs. The remainder… are forgotten. No suffering to see here.

        • Antoine 14.1.1.1
          15 February 2018 at 2:57 am

          It should be the same amount of people employed at the end of the day. I’m not seeing a calamity here

          • KJT 14.1.1.1.1
            15 February 2018 at 3:00 am

            You are probably correct.

            And probably the former Fletchers subbies will get paid more, as there is a shortage of qualified builders.
            Don’t know about all the cowboys they imported to keep wages low, however?

            • tc 14.1.1.1.1.1
              15 February 2018 at 7:19 am

              Yes then there’s the cartel practices believed to be in place on the materials supply side with that other wonderfullly well behaved kiwi icon Carter Holt Harvey.

          • McFlock 14.1.1.1.2
            15 February 2018 at 11:28 am

            That’s because you’re not thinking about the labourers who face stronger competition than the qualified tradies, the subbies who can’t necessarily weather being an unsecured creditor to one of their main clients/employers, and so on.

            You’re focussing on the idea that if I have two jars of pickles, drop one, then get another, I still have two jars of pickles. You’re forgetting the smashed jar on the floor. It’s alright for you, but it sucks if you’re the jar that got dropped.

            • Antoine 14.1.1.1.2.1
              15 February 2018 at 11:43 am

              > the subbies who can’t necessarily weather being an unsecured creditor to one of their main clients/employers

              I do have sympathy for the subbies. There’s something wrong in the framework there.

              > it sucks if you’re the jar that got dropped

              Yes, but it’s great if you’re the third jar that gets chosen.

              A.

              • ropata …
                15 February 2018 at 2:46 pm

                Broken window fallacy. It is a huge drain on the economy and the reason why we have lots of economic activity but still a shortage of housing. Maybe leaky homes and earthquakes don’t bother economists and GDP measurements but they fucked up the real economy and real peoples lives.

              • McFlock …
                15 February 2018 at 3:37 pm

                Which assumes that the third jar wouldn’t have been picked up anyway.

                It’s not like a forest, where trees have to die to make room for others. A society with well-run businesses grows more economic activity, circulates more money, and creates more jobs. Whether the growth model is sustainable is another debate, but to argue that a major employer going under is essentially a neutral proposition is, frankly, stupid.

                • Antoine …
                  16 February 2018 at 1:32 am

                  > A society with well-run businesses grows more economic activity, circulates more money, and creates more jobs.

                  Amen to that.

                  A.

                  • McFlock …
                    16 February 2018 at 12:40 pm

                    so there’s your calamity.

                    • Antoine …
                      16 February 2018 at 12:47 pm

                      If there is a ‘calamity’ here, it consists of Fletchers doing its day-to-day job of building stuff badly. That is where the real mischief is, the loss of economic activity and jobs. A couple of (admittedly major) cost estimation errors don’t worry me so much. Some wealth transfers between shareholders and a bit of disruption, but not terrible for the economy as a whole.

                      I think we should probably move on from this now, everyone else has.

                      A.

                    • McFlock …
                      16 February 2018 at 12:49 pm

                      except the people not sure whether their businesses will fold

        • greywarshark 14.1.1.2
          15 February 2018 at 10:32 am

          I think Antoine just lives in the middle of a lovely bubble, can see out, but remains untouched by the real world, just consults the treatise for the answer to everything. Similar thinking to what prevailed when we got Rodgered.

  15. RedLogix 15
    15 February 2018 at 3:29 am

    A board full of directors with little to no expertise in their core business = Recipe for disaster.

    Nothing wrong with one legal and one commercial expert, but unless the BoD is dominated by people who have grown up in the game, fully understand the reports they’re reading, and fully apprehend the risks they’re exposed to … shit will happen.

    In the wake of this disaster, the doofus notion that ‘management’ is a generic skill, really needs to be taken out back and shot once and for all.

    • tc 15.1
      15 February 2018 at 6:21 am

      Fletchers drove out or removed many people who actually knew what they were doing over the years and has been tetterring for awhile.

      It’s an old construction industry trick of ‘new projects’ filling up the bank without the actual major expenses hitting till the end. Works fine till the projects dry up…..keys govt gifted then Chch then sky convention centre amongst all that civil work they ‘win’.

      The house of cards is finally collapsing, its bereft of the relevant nous to effect a u-turn as its full of bankers and boardroom twat lawyers having pissed off the actual management figures who knew how to run it.

      I watched fletcher building write off 10mill on a project so technically retarded they were a laughing stock amongst the contractors taking the piss over a few years fleecing them.

      It’s not just at board level…..the incompetence is systemic.

      • David Mac 15.1.1
        15 February 2018 at 7:44 am

        Ha, corporate Ponzi schemes. ‘Quick land another contract before the losses roll in on the last one.’

        • tc 15.1.1.1
          15 February 2018 at 9:58 am

          that’s how it rolls in construction, even on the well run and profitable projects the costs exceed the revenue each month as the finishing trades and other touches are made to get a ‘practical completion’ certificate and release the last milestone payment.

          then the warranty period commences which is a whole different type of fun.

          • David Mac 15.1.1.1.1
            15 February 2018 at 10:10 am

            Yes, that’s why there is a career path in construction that few other industries offer. Insurers have their actuaries and builders their quantity surveyors.

    • greywarshark 15.2
      15 February 2018 at 10:33 am

      RL
      +100

      tc at 9.58
      Sounds like experience. Take note of these points I think.

  16. tsmithfield 16
    15 February 2018 at 6:53 am

    I wouldn’t angst so much about the directors. Get angst about what comes next. The public bail out.

    • Antoine 16.1
      15 February 2018 at 7:01 am

      Ya reckon?? Wanna bet on It?

      • David Mac 16.1.1
        15 February 2018 at 7:45 am

        Many low income NZers are already picking up the bill via their Kiwisaver plans.

        • Antoine 16.1.1.1
          15 February 2018 at 7:49 am

          It’s not a biggy

          Say 100k Kiwisaver balance, 5% invested in Fletchers (which is too much anyway), 7.7% fall, then you have lost nearly $400. Can be offset by gains elsewhere

          • David Mac 16.1.1.1.1
            15 February 2018 at 7:58 am

            Yes, shares fluctuate, there are many variables that can pull a price back. Signing off contracts on skyscrapers that lose $400 million can’t be one of them.

            Owe your bank $100,000 and they’ll start legal action. Owe them 100 million and the manager takes you to lunch.

            I think these clowns should lose the lot, just as I would if I made an error of that magnitude. They should be meeting the work and Income security guard this morning, just as I would be.

            • Antoine 16.1.1.1.1.1
              15 February 2018 at 8:02 am

              If that was how it worked, no one would want to run a company and so we wouldn’t have any companies.

              (I realise you may be happy with that prospect)

              • David Mac …
                15 February 2018 at 8:15 am

                Nah, I can’t help having an entrepreneurial punt, many are the same. I’ve run businesses most of my life. On the occasions they’ve failed, if I kept sweeping issues under the carpet, moving on to the next losing contract, I’d be left with an empty fridge and holes in my shoes.

                It seems once big enough the price to pay is ordering the regular Benz instead of the AMG and I think this is wrong. Succeed, great. Fail, no worries, lets go to Paris.

                • Antoine …
                  15 February 2018 at 8:45 am

                  So do you think it would have been better if, each time your business failed, you were stripped of all your assets and left in the dole queue?

                  A.

                  • David Mac …
                    15 February 2018 at 8:54 am

                    It doesn’t matter what I think, if I hadn’t acted quickly enough, it is what would of happened.

    • tc 16.2
      15 February 2018 at 7:08 am

      Best opportunity to smash it up into workable units and remove one of the most belligerent corporate entities in NZ that’s been screwing its partners for decades.

      They recently sent the earthmoving contractor on the rangiriri piece of SH1 broke after continually screwing them down to the point they fell over.

      This delayed the project whilst Higgins (recently purchased by fletchers) replaced them…..my how convenient for them.

      Better times exist beyond a broken up fletchers…..bad times lurk as long as they remain as they are.

    • Ad 16.3
      15 February 2018 at 8:51 am

      This government is chillingly silent on the whole fletcher debacle.

      I can’t detect their plan for the economy outside of minor employment regulation.

      • Antoine 16.3.1
        15 February 2018 at 8:56 am

        May not have one??

      • tc 16.3.2
        15 February 2018 at 10:01 am

        Geez they should be ready as Clark/Cullen were aware of the dangers that the duoploly of FH and fletchers were creating in civil works.

        That’s why the alliance was created with Oz’s Leightons to get some competition….anyone know how long that lasted after shonky rode into the treasury benches ?

  17. David Mac 17
    15 February 2018 at 7:42 am

    Yes, the people that needed to know the most about the business knew the least.

    The person installing the downlights needs to study for 5 years, be a qualified electrician with all certification up to date to get their $30 an hour. Fair enough, it makes sense to minimise electrocutions.

    Those at the very top of the pyramid, those rewarded with the most money, those appointed to maintain profitability, their qualifications too often amount to playing T-ball with the right guy at school.

  18. Sacha 18
    15 February 2018 at 7:47 am

    Union spokesperson says the problem is poor management and quality control:
    http://www.radionz.co.nz/news/business/350429/fears-job-losses-will-stem-from-fletcher-s-fall

    The sheer number of sub-contractors used by the company was a major part of the reason it is forecast to lose $660 million from the projects currently on its books – including Auckland’s convention centre, Mr Angel said.

    “They’ve lost control of the projects they were building, when in the past they would be their employees, their project managers and they would only bring in sub trades to do specific work like the roofing.

    “But what they’ve been doing is bringing in sub-trades for everything and our members have been in a situation where they’ve been going around and most of their work is fixing up the work of the sub-trades unfortunately.”

    • Antoine 18.1
      15 February 2018 at 7:51 am

      Interesting

    • savenz 18.2
      15 February 2018 at 1:29 pm

      So true +100 ““They’ve lost control of the projects they were building, when in the past they would be their employees, their project managers and they would only bring in sub trades to do specific work like the roofing.”

      There is so many routs going on, so many unskilled people being used through subcontractor after subcontractor and then someone signs it off at the end.

      Guess who pays apart from Fletchers for the failed thinking – the ratepayers when the council signs it off.

      The owners of the buildings who can’t use them and have to fight for remedial work to be done.

  19. greywarshark 19
    15 February 2018 at 10:07 am

    I spent some time yesterday getting some info about Fletchers and it has some links that may be helpful to fill in information gaps.
    https://thestandard.org.nz/open-mike-14-02-2018/#comment-1448786

  20. greywarshark 20
    15 February 2018 at 10:17 am

    Share market commentator Brian Gaynor of Milford Asset Management said Fletcher’s board was too shallow and wide, full of lawyers and accountants while
    (From the post.)

    Would that be applicable to the National government we have endured for so long, and also to much of Labour? It is good to understand the lawe when going into government and know how finance works, but what about people who have training in what is called evelopment at universities, have we had enough of them to have a good balanced team of movers and shakers at the top?

  21. greywarshark 21
    15 February 2018 at 10:38 am

    Antoine
    Don’t waste TS space with your spurious thoughts and enquiries.
    And send a donation to the management I suggest,in gratitude for the blog providing you with some stimulation in your lounge lizard life, or perhaps your state of illness or disablement.

  22. greywarshark 22
    15 February 2018 at 10:47 am

    https://en.wikipedia.org/wiki/Fletcher_Construction
    Wikipedia provides some brief details and a list of projects they have been involved in.

    B/I or B&I gets used in some of Fletchers reports:
    It has three main business units:

    Building and interiors
    South Pacific
    Infrastructure

    Fletchers and steel mentioned together on 9 May 2017.
    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11852040

    https://www.radionz.co.nz/news/national/330365/steel-complaint-against-fletcher-building

    https://www.stuff.co.nz/business/92382986/fletchers-steel-product-in-spotlight-after-commerce-commission-complaint

    Fletchers Ltd and steel defects – brings up some interesting headings on google.

  23. savenz 23
    15 February 2018 at 12:16 pm

    The whole advise steam is flawed by ideology right up to the top.
    Look at this article from the treasury.

    New Zealand’s enterprise culture: a dearth of management skills?
    http://www.treasury.govt.nz/publications/research-policy/tprp/08-04/06.htm

    Doesn’t even mention local low wages as a factor but interestingly makes a case for “wages in attracting the best internationally educated individuals”.

    So local wages are not a factor in a dearth of home grown management skills and skilled local people leaving or not being motivated, but wages are a factor for internationally educated individuals?

    No mention of the challenges that oversea’s managers may have with language, culture and local conditions which could explain why NZ is now screwed with low local wages, a lack of upward transition for younger managers, dinosaur management overseeing NZ biggest companies with all the same networkers with the same ideas (or lack of them) and peanut wages for other managers and staff.

    Nor is there any mention of inefficiency and pitfalls of overseas managers who don’t understand the local culture being bought in to oversight many local businesses.

    “Improvements over the long term will come from improving the quality of early education, and from targeting support to disadvantaged and at-risk children. This needs to be followed up by ongoing engagement in quality education and training both in school and after young people enter the workforce. New Zealand also has an opportunity to access pools of international talent, and a challenge in order to retain domestically educated individuals. A range of factors are likely to be important including access to housing, cultural factors and wages in attracting the best internationally educated individuals. For a greater discussion of the mechanisms through which New Zealand’s skills base can be improved see Working Smarter: the Contribution of Skills to Productivity Growth.”

    Ok, so there seems to be many assumptions, ommission and a lack of honesty in NZ analysis. That’s also part of NZ problem!! Flawed government advice from the same types of people!

  24. savenz 24
    15 February 2018 at 12:30 pm

    I draw your attention to the IYIC which says that many internationally well educated individuals actually make idiotic and impractical decisions and a product of modernity and also do not understand that their understanding of issues might be limited by their lack of experience.

    http://nassimtaleb.org/2016/09/intellectual-yet-idiot/

  25. greywarshark 25
    15 February 2018 at 12:34 pm

    Up to this time there were 23 comments – short questions or smug ones from Antoine out of 95 total. Just fact finding for those interested.

  26. savenz 26
    15 February 2018 at 1:55 pm

    Also does anyone think it’s weird that now Kiwi’s are regulated out of doing basic renovation of their own houses, let alone build one and teachers are now responsible for accidents on kids outside their control.

    But somehow in all this, industry doesn’t seem to have any responsibility for anything? The fisheries can plunder the seas, be caught but then even something basic like a camera can’t be installed (we need to take their word on it), Fletchers exec’s can lose billions in a construction boom, but that’s just some unlucky years for them, bad concrete, leaky buildings, Pike River, no corporate held accountable for it. But on the other side, the ordinary person is regulated outside of being self sufficient if they want.

    Is it my imagination or is something wrong with this picture?

  27. savenz 27
    16 February 2018 at 10:22 am

    I draw your attention to a chairman so lazy he isn’t even expected to write his own report and the CEO/underlings who writes it don’t show it to him before releasing it.

    AT is so poorly run and incompetent if it was Fletchers instead of a monopoly with free handouts from Auckland ratepayers it would be in the red a lot more than 600 million!

    They cream off over a billion a year from Auckland’s with little to show for it and now want more money/resources/charges from Aucklander’s.

    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11986372

    Note Auckland is NOT London with 10 million plus people or Los Angeles 4 million, nope Auckland only has 1.4 mill people but they still can’t make it work!

    Also apparently beaches are not polluted by sewerage but actually waste water from the pollutants in roads and the massive roofs that now the plus sized houses all have with zero gardens to soak up the run offs.

    Funny enough this is not a factor in any resource consents aka the pollutant run offs into the waste water, nope instead more roads, more cycle ways, more paved surfaces of any kind and more construction is encouraged and the effects of the pollution of this approach not even thought about, short or long term.

    “The Safeswim website has currently noted sewage overflows at six beaches: Herne Bay, Home Bay, Okahu Bay, St Heliers, Point England and St Marys Bay.

    More than 30 more beaches have a “high health risk” no-swim warning in effect.

    A Watercare spokesperson told Newshub the 40 “high risk” beaches aren’t contaminated by sewage, but instead by stormwater that contains heavy metal run-off from aluminium roofs, animal excrement, pathogens, and diesel.”

    http://www.newshub.co.nz/home/new-zealand/2018/02/auckland-s-sewage-contaminated-beaches-have-no-warning-signs.html

    Essentially we have a bunch of morons who have been encouraging as much waste water from as many people as possible into the system and thinking detention tanks will help, but actually the polluting waste water is ending up in the local ocean meaning that Auckland beaches are unswimmable.

    The effects of all the construction and increased population are not being looked at all as everything seems to be about someone making a short term dollar and a holistic approach is not even thought about.

    We can have high-rises and more houses and people but not sure we will be able to swim in the beaches anymore.

    Nobody swims in London’s Thames for a reason!

    Not sure that’s mentioned on the glossy council magazines.

  28. Colin Espiner 28
    23 February 2018 at 3:26 pm

    Simon Louisson gets a couple of things wrong in this article. Firstly, the John Key-led National government did not “trade off laxer gambling rules in exchange for getting the centre built”. The rules around gaming in NZ haven’t changed materially since Labour passed the Gambling Act back in 2002. The then National-led administration did pass a law allowing SKYCITY to get some extra tables and machines, and extended out the company’s licence for until 2035, in return for SKYCITY spending at least $450 million building the NZICC. But the laws are as rigid as they’ve been for some years. Certainly not laxer.

    To the second point, Louisson claims “questions were raised also about the openness of the tender process that Fletcher Building won”. That’s also incorrect. I think he’s referring to the questions around the openness of the government’s tender process by which SKYCITY won the right to build the centre on behalf of the taxpayer. That was criticised at the time by the Auditor-General. That’s an entirely different thing from the contract with Fletcher Building. I’ve never seen a single question raised about that tender process.

    It seems to me that in their haste to bury Steven Joyce, some commentators have conflated the problems Fletcher Building has been experiencing with the Crown’s deal to build the NZICC. For the record, the Crown had little to do with SKYCITY’s construction deal with Fletcher’s. The then-government set the parameters for the building and its overall design, but the decision to award the contract to Fletcher’s, and the terms of the deal, was SKYCITY’s alone.

    Colin Espiner
    General Manager Communications
    SKYCITY Entertainment Group

    • The Chairman 28.1
      23 February 2018 at 5:18 pm

      “The then National-led administration did pass a law allowing SKYCITY to get some extra tables and machines, and extended out the company’s licence for until 2035, in return for SKYCITY spending at least $450 million building the NZICC”

      Clearly, Colin, the passing of the new law was a relaxation of the rules. If allowing SKYCITY to get some extra tables and machines was within the former rules, there would be no need to pass the new law.