NextDC’s chairman and chief executive have both paid the price for a Melbourne community backlash that sent the data centre operator’s share price crashing last week .
The company announced its chairman Douglas Flynn would stand for re-election at its annual meeting with investors next month but retire once a replacement is in place, and CEO Craig Scroggie will forfeit millions in bonuses.
“We recognise and share the disappointment of investors resulting from our revised FY27 guidance and share price performance,” Flynn said in a statement to the ASX Monday morning.
“We are renewing the board, and I will stand down as chairman once my successor is in place. My fellow non-executive directors and I have also agreed to a voluntary 10 per cent reduction in our fees,” Flynn said.
The NextDC board had planned to ask shareholder to approve increasing the directors pay pool by $300,000 to $2.5 million at the meeting. This has now been retracted.
“The board and management are focused on two priorities: working with our customer and the electricity distributor to minimise the impact of the M3 power delay, as well as earning back the confidence of our investors and other stakeholders. There is a lot for us to do, but our task is clear.”
NextDC was already facing a board spill at the November 20 AGM if shareholders reject its remuneration report for a second year in a row over the bonuses being handed out to senior executives including Scroggie. He could receive incentives worth more than $100 million if he delivered on share price growth targets.
Those targets became much tougher last week after the stock plunged more than 40 per cent, wiping $3 billion from its market valuation in hours.
This was triggered by NextDC slashing its profit forecasts and construction spending in response to community outrage that has now delayed the installation of high-voltage power lines to its West Footscray M3 data centre.
It told investors that energy distributor Jemena was forced to suspend the upgrade in response to community and stakeholder opposition to the works and the local council is “not giving its consent until more community consultation takes place”.
Shine Lawyers is already investigating a potential class action on behalf of NextDC shareholders.
As part of the raft of changes announced Monday, another director Stuart Davis will also stand for re-election but will stand down once new directors are in place.
Scroggie will forfeit all of his short-term incentive and long-term incentive payment for the 2027 financial year, the company said.
These incentives would have been worth around $7.5 million if NextDC’s share price stayed around the $16 mark as it did in June this year. At the current share price of $5.61 the value of these incentives had dropped to around $2.8 million.
The company is expected to update shareholders at its AGM on further changes in strategy due to the downgrade last week which also saw the group pause land purchases and potentially consider asset sales.
Scroggie sought to assure the market that the changes to its financial outlook would not pose a risk to its massive debt, saying the group would continue to be “in compliance with financial covenants”.
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