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Kogan, Shafer Greed Set To Be Explosive Issue At AGM Tomorrow

After already pocketing $350 Million Ruslan Kogan the CEO of kogan.com and CFO David Shafer now want another $90M and that move has upset shareholders despite Shafer and Kogan working the phones as they chase down support from shareholders.

Questions are also being asked as to how long the two will stay with the online retailer.

Joe Ashton writing in the Australian Financial Review said that Friday’s AGM in Melbourne is set to be explosive, with three proxy houses – ISS, CGI Glass Lewis and Ownership Matters recommending shareholders vote against the resolution to approve the proposed $90M options package. Kogan and Shafer cannot vote their shares.

Ashton claims the grant is worth $90 million at Tuesday’s closing price.

These are spring-loaded options, in that the $5.29 strike price was announced on May 12 but was based on the volume weighted average price of Kogan.com shares in the previous three months (to April 30), which just so happened to incorporate most of the ASX’s worst quarter in 33 years.

Ruslan Kogan Centre, David Shafer right.

And the only vesting requirement is Kogan’s and Shafer’s continued service until 2023.

If Kogan and Shafer don’t get their $90M and quite the question is who will run the online retailer.

The board excluding Kogan and Shafer leaves only chairman Greg Ridder and non-executive director Harry Debney to call the shots and find replacements.

Since the IPO four years ago, Kogan and Shafer have trousered more than $350 million selling their shares in the company claims the AFR.

Many shareholders are claiming ‘Why the hell should shareholders be diluted to hand them even more’?

Another option if the vote does not their way is for Ridder and Debney to agree for the equivalent value in cash or using a loophole in the ASX Listing Rules to give Kogan and Shafer 6 million shares anyway, by buying them on-market. And not in three years – within 10 days.

Having disregarded in advance the verdict of their shareholders it takes a special kind of monomaniac to then seek their validation. But Kogan’s persuasive efforts, like the man himself, are irrepressible.

Ashton said that if the resolution is defeated, this will be a genuine test for the Australian Securities and Investments Commission.

Section 211 of the Corporations Act deals with paying “reasonable remuneration” to executives without shareholder approval.

Why is the statutory provision even there if a board can hand their CEO and CFO the equivalent of two years’ earnings after investors have expressly repudiated the proposal?

We can only hope ASIC dusts off its rule book rather than being another study in inaction.

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