9 Feb 2012

Tower director resignation causes board conflict

7:05 am on 9 February 2012

Concerns have been raised about board conflict at the insurer and fund manager Tower Group after an independent director resigned on Wednesday.

Denis Wood quit after he was told the company's 35% shareholder, Guinness Peat Group, would not support his reinstatement.

And another, smaller shareholder has raised questions over GPG's control of the board.

Mr Wood told shareholders at the annual meeting in Auckland that he was planning to seek re-election, until he was told that GPG would not support the vote.

"GPG owns 35% of Tower, although that is by no means a majority shareholding, GPG holds sufficient voting strength to enable it to control the outcome of this meeting", he said.

Two Tower directors are GPG-appointed, but Mr Wood pointed out their role was to act in the best interests of the company and its shareholders, rather than GPG.

"As an independent director I can have no alignment to any section or group of shareholders. Any other approach is inconsistent with good governance and best practice", he said.


At the meeting, questions were raised about GPG's commitment to Tower as it intends selling all its investments, except the threadmaker, Coats, and returning the proceeds to shareholders.

Milford Asset Management executive director Brian Gaynor, whose company owns 5% of Tower, voiced concern about GPG's control of the board and its push to sell off one of Tower's divisions.

He asked how the board can resolve the issue when one major shareholder puts forward a suggestion to sell a division and yet the rest of the board disagrees with that at the time.

Chairman Bill Falconer said the board made all its decisions by consensus and if the vote was split it would go to the shareholders.

Mr Gaynor says GPG has voting power because many small shareholders don't vote.

But GPG says it does not control Tower and it wants to work with the Board in the best interests of all shareholders.

After the meeting the chairman Rob Campbell said GPG declined to support the reinstatement of Mr Wood because it wants to rejuvenate the board.

He said he was not aware of conflict between Mr Wood and GPG directors.

Mr Campbell said GPG was in no hurry to sell its Tower stake but he would not rule out a sale this year.

Meanwhile, a new director will be appointed in the next two months.