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Steinhoff’s proposed extra payments to directors are obscene

Most troubling is the €200 000 it wants to pay the chair of the audit committee!

Steinhoff’s proposal to pay five current and former (non-executive) directors sizeable once-off payments in lieu of the “additional work undertaken during the period since the accounting irregularities were identified in December 2017” is downright outrageous.

It wants to pay Steve Booysen and Heather Sonn €200 000 (±R2.9 million) each, and Johan van Zyl €100 000 (nearly R1.5 million). Booysen is head of the audit and risk committee, while Sonn has been acting chairperson since Christo Wiese stepped down on December 14 2017. Separately, the three independent directors were appointed members of an independent board subcommittee in early December.

Shareholders have been asked to vote on the proposal at the company’s AGM on April 20. The shareholders (who remain) should treat this resolution with the contempt it deserves and vote it down. The problem is, they likely won’t.

It has, rather shrewdly, lumped together the proposed extra payments and the standard remuneration for members of the supervisory board in a single resolution. If these had been separate resolutions, we may very well see a different result.

The fundamental problem here is that these are directors of the company with fiduciary duties, not external professional consultants. They signed up for this, and have been well-compensated for their roles. The fraud happened on their watch!

One might argue, correctly, that the demands on Sonn have increased substantially since she took over as acting chair in December. Her honest and transparent (and humble) letter to shareholders in the quarterly update to end-December was a breath of desperately needed fresh air. But why not then pay her the previously approved rate (€300 000/±R4.4 million a year), pro-rata, for the chair position?

While all (current and former) directors are to blame here, the proposed extra payment to Booysen is particularly galling. He was and continues to be the chair of Steinhoff’s audit and risk committee. This body exists “to supervise and monitor the activities of the management board with respect to” practically all matters relating to audits (both external and internal), and the company’s finances. Spare us the pleas about this being a “complicated” financial fraud. Booysen ought to have resigned in disgrace.

In the motivation for Booysen’s reelection to the supervisory board at the April AGM, the group says “the nomination committee is of the unanimous opinion that his knowledge and experience match the desired expertise, and that his reappointment safeguards the continuity and knowledge of the organisation within the supervisory board.” Quite who serves on the nomination committee considering the board currently comprises four directors is unclear.

(One may argue that Van Zyl was the most recently appointed of the three – he has only served on the supervisory board since May 30 2016 – but the once-off payment here also does not seem justified).

That they did not jump ship, like most of the other directors, speaks to either their integrity, their need to attempt to restore their professional reputations, or both.

The second justification is particularly necessary in the case of Booysen and Van Zyl, who (along with former directors Len Konar and Theunie Lategan) are labelled in the 2016 annual report as “financial experts with relevant knowledge and experience of financial administration and accounting for large legal entities or listed companies.”

The board has also proposed one-off payments of €40 000 (±R600 000) to Konar and Lategan, who jumped ship “retired” from the supervisory board on February 28 2018. Again, the group attempts to justify this because of “the exceptional demands placed on their time during the period since the accounting irregularities were identified in December 2017”.

It must be noted that these once-off payments are in addition to the fees these directors earned were paid in the 2017 financial year (to September 30), as well as any fees paid for the 2018 financial year so far. If Sonn, Booysen and Van Zyl serve for the full FY2018, they will be paid €100 000 (nearly R1.5 million) each, just for their roles as members of the supervisory board. All three will earn more for their additional roles on committees (Sonn will be remunerated for her role as acting chair).

  Remuneration for the 15 months to September 30 2016 Estimated remuneration for the 12 months to September 30 2017***
Heather Sonn €34 000 €100 000
Steve Booysen €66 000 €150 000
Johan van Zyl €9 000* €100 000
Len Konar** €119 000 €185 000
Theunie Lategan €58 000 €155 000
* For four months (appointed May 30 2016).
** Former deputy chairman, and member of nomination committee, human resources and remuneration committee, and audit and risk committee.
*** Conservative estimates by author, based on approved remuneration at 2017 AGM (2017 annual report not available, for obvious reasons).

Steinhoff’s proposal to pay five directors what is effectively a bonus is tone deaf. And that’s being charitable.

* Hilton Tarrant works at immedia. He can still be contacted at hilton@moneyweb.co.za.
* He holds shares in Steinhoff International, first acquired in September 2010.

 

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Thank you Hilton for saying it as it is – obscene and absolutely wrong timing!
a) The balance of directors that comes a while with Steinhoff (Van Zyl included) have to stay on to sort out the mess they are heavily involved in and to give effect to their fiduciary duties, responsibilities and accountability. If they jump now they will forever be tarnished.
b) The timing for such ad hoc bonuses is totally wrong and inappropriate. They have been remunerated very well during their tenure to date and whilst the huge troubles were brewing under their noses and on their watch. First fix the trouble and sort out the mess and only then such bonuses will be appropriate and acceptable.
c) The esteemed, upstanding and ethical Johan Van Zyl we knew from the Sanlam days would not have allowed such undue, ill-timed and inappropriate bonuses to be paid and wouldn’t have accepted such bonus himself. He would have voted against it and would have convinced the board of the absurdness of such ill-timed contemplation. I still believe he will come to his senses and put a stop to this.
d) Stevy boy, hailed as the expert and highly qualified and experienced financial wizard should hang his head in shame. The mess occurred under his specific watch as the head of the audit committee for some years already. He should work day and night to sort out the mess and to regain some professional integrity.
e) IMPORTANT: Chrito Wiese still one of the largest shareholders in Steinhoff together with all asset managers (Sanlam & PIC included) that still hold shares in the disgraced Steinhoff (on behalf of pension funds and retail investors) should urgently demand from the board to split the proposed bonus resolution point from the remuneration agenda point and also notify them that they all will vote against this ill-conceived bonus idea.
f) The board should start realising that they serve on behalf of shareholders and should act in the best interest of shareholders including more regular and detailed reporting to shareholders.
f) The logic conclusion for investors at this time are that the directors are not sure if they could resuscitate this milk-cow and therefor wants to have another big gulp of milk before she dries up at the cost of the shareholders.
g) It is such unacceptable, reckless conduct that drives the balance share price value down in to the gutter.

Should they work for free? Just asking.

I’m interpreting this as the company wanting to keep the best people in the job. We can go on about Booysen and van Zyl being part of this, and I agree to an extent that they are liable.

Howver, if we (shareholders) care about the company being nursed back to health then the current board has to stay. They would have had access to ALL the important information regarding fraud, they kep individuals involved and would have been poart of negotiations with banks.

If shareholders want to see any funds from the lawsuits, Steinhoff needs to survive. The lawyers in Amsterdam literally saif they need a healthy steinhoff for the lawsuit to succeed.

My point is, you need to pay people for their services. This isn’t a charity. It’s irrelevant at this point to specualte about what they SHOULD have known. Odds are, none of us would have known given the complexity of the fraud and how it was hidden.

Pay them for their work. Just repay shareholders by leeping this ship alive. Jooste and his boys should be sent to prison though.

A reply to the honourable triplelevereft:

No, they shouldn’t work for free. If you read the article again, the proposal is IN ADDITION to the hefty packages they take home.

Something doesn’t sit well with me with the suits at SteinH: The article states these SteinH directors ought to be remunerated for “additional work undertaken during the period since the accounting irregularities…. “. Heck no!!! For one, the irregularities happened under their noses. So, why should shareholders have to pay directors for fixing their own mess?? Secondly, directors need to be pro-active in situations like these…..something they signed for at the inception of their employ. So, why should shareholders pay them additional lumps some for doing their work??

@Doctor. Honourable? 🙂

You make good points. I am just as mad as you.

But this is in line with the payment of other retailers across the globe? If the analysts on the BD article is to be believed. Not defending these guys.

3xleverertf – The directors are not working for free, they are handsomely rewarded to the tune of R120 000 per month plus benefits. The outrageous bonus they want amounts to an additional R650 000 per month for their attendance during the past three months.

Say what?! I know it is you Leon Schuster. Ha ha ha. Very funny.

Top trolling.

In my opinion, this sounds like a bribe to keep them silent on things they know!
A little like the way JZ operated….
SA will not go forward until these sorts of kickbacks and bribes are stopped in their tracks and the paymasters put in jail.

When the JSE starts looking like a platform for public companies to over-pay undeserving management, then something is wrong.

Then something has been wrong for 20 years

The hired help pay started going absurd when the real owners of equity abdicated and became passive watchers

Hahahahahah!! What are you saying about a certain Cape Town based TenCent shareholder?

There is no “Cape Town based TenCent shareholder” that I know of.

I only know of Oom Koos’ scheme not to hold purchased shares in his treasured Naspers but to have a right to dividends and voting via another vehicle(s).

Waiting for this little scheme to implode – and taking the JSE Index with it . . . .

Shocking and absolutely unfair to the shareholders!

My biggest concern is that these proposals are happening/happened under the “watchful” eye of the CFO. This digs questions for me: did the CFO advise the Board about financial implications of this proposal? Did s/he think about what this might do to the share price? Did s/he forget the CFO “buzz phrase” – create value for shareholders? Does s/he have a source from which to make these proposed payments?

Governance has gone to the dogs at SteinH.

Unfair to shareholders and ordinary employees – who by the way, work their butts off. Must say, local Shoprite staff who live in gang infested cape flats, spark when it comes to customer service!

Hilton – thanks – I already logged my vote against this hidden proposal, but realise Wiese & Co are not really concerned about small(ish) shareholders or public perception; their only concern is to keep rewarding people for not doing their job.
Credibility? Well, whatever is left is shot!
I would have expected the directors in question to wave their payments and not make a big deal of it – that would be the honourable thing to do.
But then, why do I expect Van Zyl, Booysen, Konar and Lategan to do the honourable thing……..its like expecting Zuma and Mugabe to forego their lump sum payments.

Steinhoff Board can take some lessons from Sanlam in this regard.

Sanlam Executives decided to cut their bonuses due to the poor performance of their investments funds on the Steinhoff exposure.

See article below.

https://www.businesslive.co.za/bd/companies/financial-services/2018-03-09-sanlam-trims-bonuses-for-steinhoff-exposure/

How do Steinhoff justify to extra pay remuneration (aka Bonuses) for Directors of the actual company involved in the scandal?

Johan van Zyl Steinhoff director getting a bonus mentioned here is also Chair of Sanlam, so don’t give them too much credit !

In South Africa, a salary is something that is paid just to get employees to show up for work. If you want them to actually perform their duties, that costs extra.

Not all employees but definitely Steinhoff directors

All the bitching sounds like sour grapes. The Board can only monitor and act on information they get. That is why Steinhoff had 4 different (or is it 5) auditors.
The board dues not audit. Get real.

Joe Else – what are you talking about – of course any board can interrogate management, bookkeepers and auditors, look at accounts, transactions, etc, can go deeper into certain concerns themselves, and in any way half of them serves on the auditing oversight committee which is directly responsible for both the internal and external bookkeeping and auditing functions. The board is ultimately responsible and accountable for the welfare of a company. Finished en klaar.

France,
your stable reply says it all -their responsibility which is justly rewarded has no due diligence constraints .

Accept that they like most investment facilities they were complacent and missed the signals.
All invested have and will suffer , hence to offer an incentive ” reward” for screwing up their task is more than morally incorrect – if it is carried at the AGM i would like to see these wise men show their integrity and reject the award -if not imagine what signal or precedent will be set for the corporate world?

That is what the board is appointed to do; ask questions, interrogate, keep a distance from operations. That’s what the Steinhoff board FAILED to do! They must sort their mess out at NO extra payment!

Joe, are you nuts? The AFS is the board’s responsibility, the auditors review it, but the directors prepapre it and sign it!

I suspect neither van Zyl or Booysen are being flooded with offers to sit on other boards – they will taint any board they sit on for the rst of their lives and that must hurt them as all they have done in their lives is be the overpaid hired help. Neither is a real businessman – just caretakers.

obviously you are working for a wage and knows nothing about management and how a business are run…

That company directors, especially non-execs can be so out of touch is incredible. There is allready a groundswell developing against excessive director pay the world over and they presided over one of the biggest corporate scandals in South African history and yet they demand more money. As another comment pointed out none of them are exactly in need of the money either, it would have sent such a powerfull message if the decided to forego their normal salary but no they go and award themselves more money.

Actions like this will mean the end of capitalism. It just gives ammunition to the hard left.

And they are non-execs for crying out loud. Why do non-execs need to get these massive packages to attend four board meetings a year and normally have little or no influence?

Executives should stop sleeping outside once a year in a cheap publicity stunt and actually start listening because the dogs are baying at the door…

Notwarren, I do believe that a majority of non-executive directors sitting on boards know naught (I could have used the word ‘clueless’) about the companies whose boards they sit on. They are just “Yes-Men/Women” who are happy to collect R2m/R3m per year just nodding to everything exec directors say.

Quick Q: is the investigation of publicly-listed companies within the ambit of the Public Protector’s hand?

Unfortunately I think you are right.

But shareholders elect these people – if you look at proxy votes there is hardly any dissenting views ever.

At least the journalist, Hilton, calls a spade a spade – where are the trade unions? This is shocking!

This calls for a consumer boycott of shoprite, pep, and the rest. The staff earn less than at other retailers like PnP
The trade unions must get involved, not just shareholders – consumers can also vote – they have feet. And take Sassa grant payments elsewhere so Shoprite looses all the pensioners’ purchases that happen when grants are paid!
Shocking idea to expect extra payment!

Lmao!

These companies serve poor people. So you want people who arguably don’t own shares and never will, to go to other stores and buy more expensive clothing and food.

Good lord. How arrogant you must be?

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