ALEC HOGG: Most company chairmen don’t like seeing shareholder activist Theo Botha turning up at their annual general meetings, and today it was Sasol’s turn to parry his hard-hitting questions. I caught up with Botha after the AGM, and asked him what he was posing to the directors.
THEO BOTHA: The one thing that really got to me was the CEO actually getting a R828 000 package for one month’s work. You could actually see from the directors that they found it very difficult to actually justify this R828 000, and apparently they just said it was per his contract. So I think this is tantamount to what we would call excessive greed.
ALEC HOGG: Strange that the companies are allowing these kind of contracts to be written in the first place. You would have thought the remuneration committee would perhaps take a different line.
THEO BOTHA: Absolutely, Alec. I think the alpha and omega in terms of remuneration is it starts and ends with the remuneration committee, and you’d expect your remuneration committee to be sensitive to these issues of awarding short-term bonuses. But they don’t seem to be sensitive, they actually don’t really understand that this type of bonus which has been awarded to this executive director can have an impact on Sasol’s reputation, as well as an impact on the remuneration committee.
ALEC HOGG: What was the reaction to your questions from the board?
THEO BOTHA: Well, I think the reaction from them was – I think they were skating on thin ice in a way. They were extremely uncomfortable about this issue and, if I was a new CEO coming into the company, being a foreigner coming into South Africa, I would never put myself in thatposition, especially coming from America. So many articles have been written about executive greed and excessive pay and people being paid for not performing, you would think that the new CEO would be sensitive to this issue and in a way he would say, shucks, I don’t think I deserve this bonus, I’ve done nothing for it but I’m getting it, and I don’t think I should do it — and I should actually forego it.
ALEC HOGG: We did offer Sasol the right of reply – in fact, our producers were on their backs all afternoon. They declined. The remuneration committee chairman there felt it was better perhaps to just let this one blow over. Will it Wayne, will this kind of thing just blow over and tomorrow one forgets about it again?
WAYNE McCURRIE: Look, Alec, as I said before, the fact is that all shareholders are looking at a company – and that’s that the level of remuneration in a company is commensurate with how well the company has done and what criteria the remuneration committee sets for the executives and how they are measured against those criteria.
ALEC HOGG: It’s an interesting point, because Jerry Schuitema, one of our columnists on Moneyweb, says that there’s a certain fee you should give to the entrepreneurs, the guys who are going there and making the business. And there’s a different category of people who are professional managers who really don’t justify what those entrepreneurs are getting. Do you ever make that differentiation when you go along…
WAYNE McCURRIE: No, look, Alec, by and large the big companies that we invest in aren’t entrepreneurial in spirit. They are run by professional mangers. They are long-established companies, normally completely global in nature. So that’s more of the smaller-cap, start-up, private equity venture that you would get, the true chap starting his company in his garage and then working through and making a lot of money out of that. I suppose you’ve got to look at what is the level of remuneration commensurate with that type of job. So these jobs are seriously big jobs.
ALEC HOGG: In our society we are rewarding professional managers a whole lot more than entrepreneurs, clearly.
WAYNE McCURRIE: I don’t doubt.
ALEC HOGG: Why do you want to be an entrepreneur when you put everything on the line and you can get R800 000 bonus for one month’s work?
WAYNE McCURRIE: Alec, I must say I don’t know the details of what Sasol paid their chief executive and what his contracts are. But also, quite clearly, I don’t know how much entrepreneurs earn, because they don’t disclose it. So I don’t know whether an IT start-up in private equity is earning R500 000 or R50m – you just don’t know because it’s simply not disclosed. So I certainly wouldn’t make the statement that professional managers are being paid more than entrepreneurs because I simply don’t know the facts behind that.
ALEC HOGG: Wayne McCurrie, giving us his insights on that.
Dale Wood joins us now, from RMB Capital Markets. An interesting story, Dale. The company Hyprop, which is one of our bigger property trusts, has a shareholder, Atterbury Holdings, and Atterbury wanted to sell a portion of its 18m units. They came along to you because I guess if they dumped 18m of those units on the stock market it would have really badly affected the share price. It’s an interesting dilemma that you were faced with. Was it an easy solution?
DALE WOOD: Hi Alec. Certainly it’s not an unusual solution. We spend most of our time in equity capital markets looking at helping investors with exactly this type of problem. The concept of a block placement, off market, run as an auction, is certainly not a new one. I think the nuances around how we ran it and the support we managed to get, indicative supports before, to give us confidence to launch in these markets, are probably the unique angle that we brought to it.
ALEC HOGG: It’s a big ticket. In total they wanted to sell 8m, you ended up eventually selling 12m units – R600m. It’s not your round-the-corner everyday sale.
DALE WOOD: No, absolutely. We were fantastically happy with that and it’s exactly as you said – that price take isn’t something – especially given Hyprop’s liquidity level, that you could just trade out to the market easily. So certainly in these conditions to get away half a billion offering is pretty good.
ALEC HOGG: Mainly South African interest, I see.
DALE WOOD: Yes, absolutely. We were happy with the international investment interest, but most of the messages we got from international markets were that it looks like a good company, happy, but right now there’s just too much…going on in Europe to make a commitment.
ALEC HOGG: And the major South African investors who came to the party?
DALE WOOD: I can’t mention them specifically by name. … But certainly you wouldn’t be surprised by the names on there…typical asset managers…we had a spread of about 14 different investors coming in there, and you’d recognise them all.
ALEC HOGG: Is this a process that more and more companies are using?
DALE WOOD: It’s certainly is. I think, when you compare the South African equity capital markets to internationals, I think our companies here are slightly less aware of the potential options that they have in terms of equity capital raising, and certainly at RMB as we started focusing in the last five years on equity capital market solutions we are certainly starting to see a greater awareness of the options that companies have, and are starting to see some of them starting to explore some more sophisticated solutions.
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