The proposal, to be voted on at the company's Dunedin annual meeting early next year, was developed in consultation with Contact shareholders and has been endorsed by the New Zealand Shareholders' Association.

Contact chairman Phil Pryke said at a special meeting in Auckland that the proposal responded to calls by shareholders for a closer alignment of the interests of directors and shareholders.

The proposal provides for: an increase in director remuneration to bring payments into line with similar Australasian companies; a restructuring of directors' payments so that around half of independent directors' post tax remuneration is paid in the form of restricted shares; and an abolition of future entitlements to retirement benefits for directors.

Under the proposal, directors' (non-Edison Mission Energy affiliated) base remuneration would increase from the current $NZ45,000 to $NZ60,000 in fees and $NZ30,000 in restricted shares. The chairman would receive $NZ120,000 in fees and $60,000 in restricted shares, up from the current $80,000.

Directors will need to meet their tax liability from the cash component of their remuneration. Accordingly, the after-tax cash component of fees would be largely unchanged, with most of the increase taking the form of restricted shares.

Pryke said the Contact board recognised the changes represented a substantial increase in remuneration, but the board was confident those increases were warranted.

International advisory firm John V. Egan Associates had determined the remuneration of Contact directors was well below the market norm for similar New Zealand and Australia companies and had actually recommended a higher level of fees than that proposed.

Pryke said Contact was one of the strongest performing listed companies in New Zealand and that for every $1 invested at the time of Contact's listing in 1999, an investor who consistently reinvested all dividends would today have $2 in pre-tax terms - a return of more than 100% in less than five years.

"Strong leadership has been a key factor in Contact's success and the proposed level of remuneration is necessary to ensure Contact continues to attract high calibre directors with the capability to lead the company successfully," he concluded.