The true cost of Bowleven’s board over 10 years

On Friday Bowleven’s board issued a rebuttal to Crown Ocean’s damning open letter to shareholders. The board focussed on ten issues it believes Crown Ocean has misrepresented, with the chief complaint being how much the directors have earned. Crown Ocean claims “The Board were awarded remuneration totalling US$44 million over ten years.” Bowleven’s board tells us “The correct figure is US$33 million”. Who is right?

If you go through Bowleven’s annual reports for the last 10 years and add up the total cash remuneration to the board, the total figure comes out as just over $33.31million.

One interesting point to note is that in 2008 Bowleven restated board cash remuneration for 2007 to $2.966milllion, up from the $1.537million originally reported. This looks like an appalling set of errors to have made in audited accounts, but it was 10 years ago and is unlikely to have much bearing on the vote at the AGM. (Though for the record, in the original 2007 report Kevin Hart was reported to have earned $188,000, only for it then to turn out he actually earned $368,000 – did he not read the original annual report?!)

Based on these figures it appears at first glance that Bowleven’s report is more accurate, so how might Crown Ocean have arrived at the $44million figure?

Reading through the figures and it looks like Crown Ocean has also included share based compensation and social security costs.

For the full years from 2007 to 2016, Bowleven’s board received a total of $7.396million in share-based payments. It is perhaps reflective of the current board’s attitude towards shareholders that it did not include these payments in its calculation. After all these directors appear to have cared so little about share price performance over the years, why would they believe the generous piles of shares they awarded to themselves would have any value?

This leaves social security costs. Over the last 10 years Bowleven has paid $3,290million in remuneration-related tax.

Taking into account all the employment costs of Bowleven’s board over the last decade and the directors cost the company $44million. Crown Ocean’s figure is correct. Arguing over whether this amount is technically “remuneration” is ridiculous. This is what the directors cost the company, while destroying shareholder value. They have to go.