In the last year before Lombard Finance went pear-shaped, Sir Douglas Graham was paid $81,104 to be its chairman.
Fellow directors Bill Jefferies and Lawrence Bryant received $42,187 and $33,750 respectively.
It doesn't sound like much, really, when you're carrying the can for $160 million of investors' money.
Top earner on the board was Michael Reeves, who got $397,929, reflecting his operational role as chief executive.
All four, of course, were convicted last week on Securities Act charges relating to the collapse of Lombard.
With the exception of Reeves, Lombard's directors would not have seen their roles as full-time jobs and their pay reflected that.
But part-time clearly doesn't mean part responsibility - all four are firmly in the firing line for the huge losses incurred by investors after Lombard called in receivers in April 2008.
This has led to expressions of sympathy in some quarters and we'll probably see a call for higher directors' fees to compensate for the onerous burden of board service.
Well, let's not get all soft just yet. After all, there are plenty of people whose remuneration arguably doesn't reflect their important responsibilities - nurses, say, or policemen and women, or teachers.
Pro rata, all three groups receive typically less than the Lombard directors did.
All three also receive considerable job-specific training to help them carry out their responsibilities.
Directors, however, are often appointed on the assumption their existing knowledge and skills are appropriate.
In my view the finance company disasters, including Lombard, show this assumption is incorrect.
In Lombard's case, secured debenture holders owed $110 million are likely to recover just 22c in the dollar - so far they've received 11.5c. That's about $86 million up in smoke.
It's the usual story of making capitalised interest loans to high risk property development projects on second ranking security, and the Kiwi investors who lost their life savings as a result are typically unimpressed by arguments that lenders were caught out by an imploding economy.
But the question of who, or what, was responsible for losses at Lombard didn't form part of the latest case.
At issue was the narrow matter of whether aspects of Lombard's investment documents were untrue, and whether directors should have known they were untrue.
The court found in key respects the answer was yes, and yes.
In particular, Lombard's claims around its liquidity - how much cash would be available to pay its debts - were found to be wrong.
Fair enough, but it didn't need a hugely expensive court case to demonstrate that.
Lombard, like other mezzanine property financiers, routinely made false liquidity statements in its prospectus documents, but it was perfectly legal at the time.
The detail was in the way they reported loan maturities. Even if a development project had a multi-year timeframe before yielding cash from sales, finance companies were lending short-term, usually over six to 12 months.
Technically this gave the opportunity to review progress and reconsider loan terms as the project progressed - a sensible thing to do.
But it also allowed the lender to present the loan as contractually repayable within six to 12 months, even though repayment would be impossible without refinance.
In the real world, repayment was achieved by rolling over the loan, which meant no cash actually came in to repay debentures.
Lombard's September 2007 prospectus, one of its last, said it had $104.8m of loans maturing within six months, apparently more than enough to cover debenture repayments of $52.4m.
This was legally true but wildly wrong in the real world.
Reflecting on the Lombard board, only the CEO, Reeves, had directly relevant financial experience.
Two of the directors, Sir Douglas and Jefferies, were particularly eminent politicians with a strong legal background - high calibre people in their field.
Personally I would tend to see a preponderance of lawyers on a company board as a negative factor - they are useful folk to have around but I wouldn't want to ask one for financial advice.
More than legal knowledge, I'd regard financial and commercial nous as pretty fundamental for board service.
I recall a few years ago the chairman of a $100m investment fund cheerfully admitting to me he was "not a numbers man" and wasn't entirely familiar with the details of the fund's financial arrangements.
It was probably no surprise the fund went on to lose a fortune.
Anyway the Lombard judgment is a sign, as if more were needed, that the age of the amateur director is over.
If these people are to be held responsible for their actions - and they should be - they need the tools of the trade.
For those needing a financial upskill, training in finance should be mandatory.
For those skilled in finance but lacking industry specific knowledge, likewise formal training in the relevant industry should be provided.
What they don't need is higher fees - that won't change anything.
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I think director fees will have to increase, otherwise companies may find it hard to attract specailised people with the appropriate knowledge.
""that the age of the amateur director is over."" True true true. Should there have ever been directors who didn't know intimately the skills of the business they were directors of.? The law was an ass and many an investor has lost plenty. The "Show Pony" company Director fundraiser device should be consigned to a small glass showcase at TePapa with large warning signs on it.
Were the directors approached to act as directors because they were seen as part time light weights?
Thanks Tim Hunter for the most detailed and rational e - story on this topic yet. Now novices can understand the background.
Good article . I think the court got it right - they've knowingly made false financial statements which have cost investors heaps.
The 3 are smart lawyers who know just how to get basic facts straight , to cover their backsides......but in the lax financial / fin-co scene , people were getting away with a lot , as Tim says. Even the TV adds with old buildings and huge pillars , are farcical lies , implying old European companies.
Lawyers in our terrible adversarial justice system - which has been designed by lawyers as an employment scheme - are used to lying and playing the system / game to how far they can get away with things. Absolute truth rarely applies - it's what you can convince judges ( ex lawyers ) juries , investigators etc.
Apart from the 'secured' debentures - 110 million $ - there was subordinated debt ( eg further , unsecured issues with no chance of recovery ).
The 2007 Lombard statement of 104 million due in months - supposedly covering outgoings of 52 million to the bond-buyers was just fraud ( false advertising - just like the pillars ). And the legal 3 would have known that , while thinking as lawyers that legal technicalities would save them......but didn't.
It's time to stop feeling sympathy for these ""sincere"" and rich men - getting a slap on the wrist , not jail, and think about the many losing their old age support.....now ruined.
All the swindlers in the Fin-Co collapses so far , have got off very lightly. Including the Hotchin bros.
Prior to Lombard , Michael Reeves the CEO had made a false over-statement in a prospectus and was had up for it . The 3 legal eagles would have known that, and they were there for their names , to lend credibility and attract innocent investors. They knew also that Lombard was not an old company with stone pillars outside the front door - as the TV adds falsely portrayed.
As top lawyers they knew they were there for a well paid ride - for very little input - but would certainly do their homework and cover their arses , as any competent lawyer does. Graham ( a top Dunedin lawyer prior to Parliament ) then says he doesn't really know anything about the prospectus. I don't believe him.....neither did the court/judge .
Graham thinks his knighthood should be safe . It depends what's envisaged with these being issued , but if Mick Jagger can get one anything is possible and soon we might see Keith Richard honoured for services to drugs.
Note, many folks linked to the NZ business Round Table who have become knights ( of it ). I see this as reviving the good old days of knighthood when errant knights could gallop around the countryside raping and plundering . Explains the job these people tended to do on the economy.
How also could you explain Roger Douglas' knighthood except as recognition for a violent job of economic plunder....leaving a nation poor and wounded ?
The Round Table groups are directly linked to the RIIA - directly controlled by the old elite City of London bankers and finance gurus. They pretty much tell the Queen what to do......hence knighthoods.
The Queen has stripped Freddy Goodwin of his knighthood.
RIIA, which I assume you mean the Royal Institute of International Affairs.
Like minded organisations will have links with other like minded organisations where they share ideas.
It's not link it a conspiracy that unions and the Labour party are linked. Only in your mind its all part of the VRWC.
I will let you know on a little secret that wearing a tinfoil hat actually increase the chances that your thoughts can be monitored by the CIA.
Douglas Graham was the Lombard Chair of Board .....a part time show-job at 80 grand p.a. As an ex lawyer and political policy maker he knows how to get things drafted right. But now he basically says he saw and read nothing.....and is/ was ignorant
He knows there's no pillars holding up the roof, and that CEO Michael Reeves drives a Maserati ( not a chariot ) and was done for a false prospectus statement prior to Lombard.
So surely he is going to read the prospectus to make sure it is true and can't bite him later ? The glaring problem - easy for anyone to understand - is the 2007 prospectus states the 104 million $ in loans is due in 6 months , clearly implying it will be paid then, to cover a 52 million $ new debenture issue. .
In reality , nearly all loans were for building projects and mostly with 1 developer . So loans had to be rolled over / re-financed , and repayment could be impaired by conditions such as delays in work, consents /paperwork and low /slow sales. The 104 million will not be paid back in 6 months
Apparently the Lombard wigs thought they could be saved by technicality and semantics ? Judge disagreed. They've sought much cash via false statements. Lombard default is 127 million ( incl 17 million subordinated debt ).
Meanwhile Freddy Goodwin running RBS-Royal Bank of Scotland was guilty of megalomania....but not fraud. He outbid Barclays ( !! ) for Dutch bank ABN Ambro , then had to issue more debt ( which defaulted ) to cover the group in a declining market. The Queen is stripping him of his knighthood for foolishly losing all that cash....but - unlike the Lombard 4 - he wasn't issuing false statements to attract the money. So why would Graham not lose his knighthood ?
Two questions that will probably never be answered are why Reeves chose high profile New Zealanders to be on the Board with him and why did he want people of integrity more than outside, non-executive Directors with financial markets and/or accounting experience.
Lombard was always Michael Reeves Company and his choice of fellow Directors was different to most. One could assume that he wanted to add integrity and professionalism to his operation but he did not see the need to bolster financial experience or even more fundamentally added stewardship.
I have some sympathy for Graham, Jeffries and Bryant but none whatsoever for Reeves. I also concede however that anyone who has lost money will not see the difference between Reeves and his less well-informed Board members.
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Unless Directors front up to the office every day and oversea the lending & spending deals, how can they be responsible for the day to day transactions. If that was the case, all the Directors should've run the show themselves. An investment prospectus publication is not running or making decisions within a company on a daily basis. That is the senior management job. Senior management no doubt comprises off accountants, sales professionals the CEO and whoever else are deemed as experts in the field as well as outside auditors. What this situation implies is that the Directors were the only group who knew the real position of Lombard. Poppycock.