Elders board faces grilling on 'failed' CEO search at AGM

Although the agribusiness giant posted strong financial results in a year full of commodity price, climatic and cyclical challenges, much of the discussion at the AGM centered around the cost of the company's search for a replacement for chief executive officer Mr Allison.

Mr Allison had signalled his intention to step away from the role in November last year, but after an extensive search for a replacement by company management, was enticed back with a bigger pay and incentive package.

Shareholders - in person and online - challenged the board on whether it was appropriate that board members received pay rises and Mr Allison an increase in pay and benefits after what they described as a failed search process.

The sentiment was reflected in shareholders' vote against adopting the company's remuneration report. More than 60 per cent of votes were against carrying the motion.

If shareholders vote against the motion again at next year's AGM, Elders would be required to put a spill resolution to the AGM on holding a further meeting about spilling the board.

Elders chairman Ian Wilton dismissed the notion the CEO search was a "failure", saying Elders had identified a suitable candidate that withdrew during the process and they had ultimately secured Mr Allison's continued services.

"We had already previously announced we were going to advise of Mark's successor by July and it was apparent we weren't going to achieve that so the best option was Mark quite frankly," he said.

"The fact we paid Mark more is not a reflection of a failure of the process, it's a reflection of the market at the time.

"Had we taken on the other person we were looking at, we would have paid considerably more in terms of the amount we would have had to pay to get them out of their existing long-term incentive arrangements with their previous employer."

Mr Wilton said pay increases to the board were judged against the market and advised by remuneration consultants and he considered them "modest" given they were less than inflation.

He said while a small preliminary fee had been paid for the search process, it was not comparable with what the company would have paid if they'd appointed a successor.

Considered by many as the man largely responsible from dragging Elders back from the precipice during his initial years as CEO, Mark Allison says he is putting no end date on his current tenure.

Mr Allison joined Elders as a non-executive director in 2009 and served as chairman and executive chairman before he was appointed managing director and CEO in 2014.

Overseeing a strong resurgence in the company's fortunes in his nine-year tenure, it was announced in November last year that he would be leaving, resulting in a 23pc drop in Elders' share price.

It was then announced in June this year he had been enticed to stay on.

His pay package was increased from $1.09 million to $1.5m, with retention bonuses of $500,000 a year and service rights equating to 90,000 shares also offered for two years.

Speaking with Stock Journal at the company's AGM, Mr Allison said he was treating his current tenure as a fresh start.

"I hadn't planned to retire in leaving Elders, I just thought ten years was the right amount of time for some fresh thinking so I was taking on other board roles," he said.

"I've converted my excitement for those roles back into being CEO of Elders and I'm treating it like I'm a new CEO."

While shareholders showed their support for Mr Allison by voting to approve his long-term incentive at the AGM, they voted against his service rights.

The remuneration report and Mr Allison's service rights were the only motions not to be supported.

While Elders share price has slid from more than $14 in April last year to as low as $5.50 in October, the company's leadership are positive about what the future holds.

The price has rallied in the past five weeks to sit at $7.53 today.

CEO Mark Allison believes the company's shares are still undervalued and the company's diversifaction efforts meant its fortunes were not as closely tied to livestock market movements as many perceived.

Elders posted underlying earnings before interest and tax of $170.8 million in 2022/23. While down 26pc to the prior year, it was still the company's second highest EBIT in the past ten years.

Dividends totalled 46 cents a share and there was a 16pc underlying return on capital, above the target of 15pc.

Management acknowledged 2022/23 had been a challenging year, but the strong financial performance illustrated the company's continued ability to make good money in average years and great money in good years.

"Elders is well-placed to take advantage of conditions in agriculture and pursue opportunities for growth and diversification," Elders chairman Ian Wilton said.

"In our sector, climatic conditions and commodity prices will always fluctuate through the cycles.

"Our response remains to stay focused on the controllables and delivering stakeholders with a strategically diversified business model.

"Resilience is not a new attribute for farmers or Elders."