Workers' comp tiff creates rift among builders

When I think of hostile takeovers, I think of board rooms, billionaire investors and hordes of execs in dark suits and power ties.

I also think of Michael Douglas.

What doesn’t come to mind is construction sites, guys in tool belts and pickup trucks.

That’s why I find the current proxy battle between the Home Builders Association of Georgia and the builders who sit on the  board of the state’s largest workers compensation insurer  interesting.

This is builder vs. builder – and it could a long-term rift in the state’s usually harmonious home- construction industry.

“I’ve never seen the state association so mad about anything,” said Bill Beazley,  the  president of Bill Beazley Homes Inc., one of Augusta’s largest residential contractors.

Here’s what’s going on: The association  is urging its 13,000 members, through three  dozen regional home- builder associations, to sign  blue  proxy cards to oust the directors of Builders Insurance, the mutual insurance company that Georgia builders created two decades ago to provide affordable workers compensation insurance.

The association  alleges the nine-member board has been lax on corporate accountability and has been grossly overpaid at the expense of policyholders. The association wants to install its own board to rein in board compensation (which it says was $1.9 million in 2006 and ’07) and increase policyholder dividends (which it says have  fallen from 13.6 percent of premiums to 1.5 percent of premiums since 2000).

One of those board members, Chris Bowles,  the  president of Augusta-based remodeling contractor Bowles Construction Co., received $173,156 in director compensation in 2006.* The association  said his 2007 compensation hasn’t been reported.

Mr. Bowles, who is also a member of the association’s  local affiliate, the Builders Association of Metro Augusta, did not return my phone message seeking comment. He did, however, forward the message to Builders Insurance’s public relations firm, Manning Selvage & Lee, which said that all communication would come from Builders Insurance CEO Patrick Mitchell.

Here’s what Mr. Mitchell said: Corporate accountability and director compensation is a “red herring.” The real issue, he said, is that the builders association is upset about losing revenue.

It all started in April when the Builders Insurance board voted to open coverage up to non-association  members through a  contractors organization whose dues are $60 a year, compared to $300-$600 for the typical association -affiliated builders association, where dues pay for member programs such as government- affairs initiatives and networking meetings.

The April decision also ended Builders Insurance’s long-time practice of paying “endorsement fees” to the association  (the payments to affiliates will cease at the end of the year).

Mr. Mitchell said there is nothing sinister behind the decision to end the association’s  exclusivity – the company is simply trying to expand its policyholder base.

“For years we’ve understood people haven’t been able to afford (coverage) because of high HBAG dues,” he said. “Looking at today’s economic downturn, the board decided we should have a low- cost alternative.”

Builders Insurance has responded to the association’s  takeover attempt by asking builders statewide to sign  white  proxy cards, which would keep the current slate of directors in place.

As for exorbitant salaries and compensation, Mr. Mitchell argues the company has done well and its directors are being compensated accordingly. He added that  the company has paid out more than 40 percent of its profits in the form of dividend payments to policyholders since 1997, and that just last month it distributed $1.6 million in dividends.
The proxy vote is expected to conclude in 60 days.

Is it a case of a handful of builders getting fat off rising workers’ comp premiums, or is it a case of an association trying to protect its membership dues revenue stream?
The home-builder community will have to decide.

If the blue cards win, expect the installation of a new board (which would include Mr. Beazley) and a thorough audit of Builders Insurance’s finances. If the white cards win, expect some of the association  members to switch their workers comp coverage to another company (rumor has it that North Carolina’s builder-created insurer could be doing business in Georgia by July).

Regardless of the outcome, there will probably be lingering hostility for years between contractors who sided with the builders associations and those who  sided with Builders Insurance.

“There’s no fun in this,” said Mr. Beazley, who served on the Builders Insurance board during the 1990s, when directors received no compensation. “We trusted them to run this organization like it should be run.”

* They must have really long board meetings, and a lot of them.

A FINAL (AND UNRELATED) WORD ON HOMES: An increasing number of soldiers could come home from Iraq or Afghanistan to find they have lost their homes, foreclosure analyst RealtyTrac Inc. recently reported.

The company said foreclosures are drastically increasing in many cities and towns near military bases. The biggest surge was in Columbia , home to Fort Jackson, where properties in some stage of foreclosure rose 492 percent from January to April, compared with the same period a year earlier.

The second-biggest increase was 414 percent in Woodbridge, Va., next to the Marine Corps Base Quantico. Columbus, Ga.,  the  home of Fort Benning, was 102 percent higher.

In Augusta: a 10.9 percent increase. That’s not only lower than many other military communities but it’s also lower than the nation as a whole, where foreclosures increased 59 percent during the same period.

With Fort Gordon serving as the Army’s information technology center, there’s no doubt military personnel in Augusta are smarter than the average soldier. Apparently, they’re better money managers, too.

WE WISH HIM WELL: Last week, Columbia County economic development czar** Zack Daffin announced he will step down  next month to be a financial adviser at Smith Barney’s Augusta office.

When the announcement was  made, he was leaving to take an undisclosed job in the “private sector.” My first thought was Georgia Power (because he came here from sister company Alabama Power), but then it all made sense  when I pulled a 4-year-old story out of our archives in which the former Marine Reservist said he had long wanted to be a stockbroker.

Hats off to you for following your dreams, Zack.

** Technically its “executive director of the Development Authority of Columbia County,” but I think "economic development czar" has a nice ring to it.

PRINT PLANT PERFECTLY PROFITABLE: Columbia County’s Quebecor World printing plant continues to do well despite the economic downturn that led to its parent company’s bankruptcy filing  this year.

Though the Canadian-based company is selling off its European operations to an investment group in the Netherlands, the local plant is planning an open-house party for employees and selected county officials.

Plant Manager Pat Quinn said employment and productivity at the facility, which prints catalogs and retail inserts, have  remained steady.

A larger party for the general public could be on the table for discussion after  market conditions improve, Mr. Quinn said.

GAS-SAVING TIP: When traveling on a highway or interstate, pick a speed. Set your cruise control. Leave it alone.

You’ll save gas and annoy fewer people (me) who don’t appreciate your schizophrenic fast-slow-fast-slow road ballet.

WORD ON THE STREET: Folks are talking about how the Jay’s Music Center store at the corner of Washington and Berckmans roads has been acquired by  Augusta National Golf Club for a ridiculous amount of money.

If a sale has occurred or is in the works, we wouldn’t know.

There are no public real estate records indicating a sale has occurred , and the Frohman family, who  owns the business and the property, said they have not sold to anyone.
Maybe someone out there is engaging in a guer rilla campaign to boost the property’s value?