Cromwell Property’s future should go to vote says expert, as pressure builds for CEO’s exit

Cromwell Property is weighing the future of its CEO as it faces a board spill meeting and pressure from dissident shareholders.

Cromwell CEO Paul Weightman’s future has been the subject of speculation.

A move by the under-pressure Cromwell Property Group board to weigh up the exit of long-serving chief executive Paul Weightman has raised the hackles of a leading proxy adviser, who wants the company’s future to be put to investors.

The $2.3bn property funds company has come under intense pressure from dissident shareholder ARA Asset Management in the wake of the listed group earning a second strike over its remuneration report at its annual meeting last month.

Cromwell has been under siege for months from ARA and Singapore’s powerful Tang family, which have rebelled against the company’s strategy which has included a risky push into Polish retail assets and setting up new funds to add to its $12bn empire across Australia and Europe.

Although they insist they operate separately ARA, with a 30 per cent interest, and the Tangs, with about 16 per cent, drove votes of about 60 per cent against the directors up for re-election at the meeting, as well as against performance rights to Mr Weightman.

The dramatic outcome has prompted planning for a meeting to spill most of the group’s remaining directors, and reports that the long-serving Mr Weightman would depart the business as one means of heading off the meeting.

Independent directors Tanya Cox, Lisa Scenna and Jane Tongs would face votes at any meeting on their board positions.

In a nod to these pressures Cromwell said Mr Weightman had been executive chair or CEO since 1998 and “succession planning has been an issue on the Cromwell board’s agenda for some time now”.

In a statement the board also said it “believes it is best practice to always consider what comes next and, given his tenure of 22 years, natural for his position to be a matter for regular and ongoing discussion between Mr Weightman and the board”.

ISS head of Australia and New Zealand Research Vasili Kolesnikoff said that there were “material concerns” that ARA was effectively taking control of the company without paying the right price. ”Shareholders did not receive a control premium,” he said.

Mr Kolesnikoff said there were also issues around board independence because it had become apparent that ARA and the Tangs would vote against directors that are “not suitable” to ARA.

“This all plays out with consequences for independent decision-making and performance,” he said.

The ISS head said the issues needed to go to a spill meeting, rather than the CEO being fired to save directors. ARA and the Tangs could clearly and publicly show their cards at the spill meeting.

“I really cannot see the benefit to shareholders of terminating the longstanding CEO who built the company to save a couple of directors,” Mr Kolesnikoff said.

He suggested that Cromwell could find new directors and there was also issues in putting in a new CEO who had not been appointed through a rigorous selection process.

JPMorgan analysts have suggested that local ARA head, the well-regarded David Blight, a former Cromwell director who quit last year after ARA was cut out of a major equity raising, could become chief executive.

However, the ISS head warned this could have “massive consequences” for investors.

“I think for transparency, this spill meeting needs to happen so that the market can see the arguments and proposals of all parties in making their votes, namely what ARA is proposing as it no longer appears that it is interested in proportional representation in the board of its interests but to control the board and company if the CEO and directors are removed,” Mr Kolesnikoff said.

If Mr Weightman leaves there other senior staff who may also exit, which would put the group potentially into a state of flux, he said.

At last month’s annual meeting the dissident investors voted down three directors and gave the company the strike. Together they control about 46 per cent of the company and they led the charge that saw Cromwell chairman Leon Blitz and two other directors, Andrew Fay and John Humphrey, exit.

The second strike set the scene for an extraordinary meeting within 90 days to vote on a spill of directors who were on the board when the remuneration report was approved.

Directors that ARA supported when they went on to the board — corporate raider Gary Weiss and Melbourne businessman and ABC director Joe Gersh — have been left as highly influential as they are not subject to the spill.

Minority Cromwell shareholders may have little hope of heading off ARA with an estimated 95 per cent plus of shareholders needed to come out to counter their votes and those of the Tang family at any meeting.