NOMPU SIZIBA: JSE-listed Purple Group has decided against paying its non-executive chairman, Mark Barnes, fees amounting to R2.858 million for the year ended August 2018. It came out with a statement on Monday to say that it had incorrectly disclosed his fees in that amount, when in fact his fees would amount to R500 000 instead. The latest move has got some scratching their heads as Barnes, who is also the CEO of the South African Post Office, was paid over R2 million for the two previous financial years. But could the about-turn have something to do with some shareholders making a noise about the planned R2.8 million disbursement?
Well, to discuss the matter further, I’m joined on the line by Theo Botha, a shareholder activist and one of the people who raised the alarm at the original planned payout.
Thanks very much for joining us, Theo. You are one of the people who took issue with Mr Barnes getting a non-executive chairman’s fee at Purple Group of R2.8 million. What were your reservations?
THEO BOTHA: Well, I just couldn’t believe it was so high for a company with such a small cap. If you look at some of the other companies, let’s say, Bidvest, it has a R40 billion market cap and the chairman there earns R1.4 million. Capitec has a market cap of over R128 billion and the chairman earns R1.3 million. Purple Group’s market cap is R280 [million] and the chairman is asking for an increase to R2.8 million from I think R2.6 million. I thought this was outrageous.
NOMPU SIZIBA: Do you think that the company’s issuing of that statement yesterday, suggesting that they had made a mistake, and that in fact the fee would now be R500 000 and not the R2.8 million – do you think that came as a result of pressure from people like yourself?
THEO BOTHA: Yes, the pressure that I applied was in December. At the end of December I raised this issue on Twitter, and I said, “This is exorbitant in terms of the fee structure.” I don’t accept their argument that they made an error. If an amazing error, then they made an error on the annual fees, which were in the annual financial statements as R274 000 – that now has become R291 000. Then they made another error on the attendance fee for board meetings – that was R37 000 and is now increased to R40 000. And then the attendance fees for sub-committee meetings was R18 000, and that’s now been increased to R20 000. How can you make so many errors?
And then the other issue which I think shareholders should be aware of is that I think it’s really unacceptable for a shareholder to go to a meeting and then say “Oh, we’ve changed this resolution.” We have a form of communication that, if you are a listed company, you can put through Sens [Stock Exchange News Service]. So surely they should put it through Sens before the shareholders get to the meeting, and say, look, we’ve made an error, and this is this reason for the error. Forewarn the shareholders. We weren’t forewarned
There were three other resolutions which were withdrawn; one was the passing away of Mr Lubner, so that resolution was withdrawn. And then the other was the ratification of Mr Dennis Alter. That was withdrawn. I think that in terms of the two resolutions they should have forewarned the shareholders and told them, look, this is what we’ve done. If you are shareholder and you send the proxy in and you can’t attend, then the chairman has probably the right to vote the shares in the way he thinks best.
NOMPU SIZIBA: And what about Mr Barnes getting paid an addition R2 million for having secured a R100 million investment by Sanlam into EasyEquities, which is about 2% of the transaction value? I see most shareholders voted in favour of that at the AGM, with around 7% voting against. Were you one of those who was against?
THEO BOTHA: Yes. I voted my one share against that. The reason was that I think that it sets the wrong precedent. Here we have a chairman who actually owns 22% of the company. So basically they told me, when I challenged them on this issue, that Mark Barnes worked on this for 18 months; he spent a lot of time and effort on it. So it probably ran into days in terms of him working on this issue. I think I answered well, surely the CEO or the executives should also be involved, and they said that yes, the executives were out there trying to raise funds. It was in a very difficult market that they were moving to try and get the funds, and Mark was the one who managed to do this.
However, Mark owns 22% of the company. They also said that this was a fantastic deal because R100 million for an equity sale on EasyEquities was 30%; that [values] the company quite high in relation to the company making losses. But if it’s such a great deal, Mark would benefit from it through his owning of 22% of the shareholding.
On top of that, Mark also gets the benefit of the R2.7 million chairman’s fees which are hopelessly out of the market in the sense that it’s right at the top end of chairmen that are being paid. I have just mentioned Capitec and various other companies. They don’t even pay that.
So for the past two years Mark has actually been overpaid, and we can see by how much he has been overpaid by looking at what he has come down to, which is half a million. So he’s been overpaid by R2.2 million per year; that’s R4.4 million over the past two years. This is out-and-out greed.
NOMPU SIZIBA: You indicated that you were surprised that Mr Barnes and other key people were not at the AGM – and that includes the company’s auditors. Just elaborate on your concerns in that regard.
THEO BOTHA: Well, I think you would expect, when you attend an annual general meeting, the leader of the company, being the chairman, to be the one who coordinates this meeting. That’s the first formality. You would also expect the chairman of the audit committee to be there, you would expect the chairman on the remuneration committee to be there, you’d expect the chairman of the social and ethics committees to be there, and you’d expect the chairman of the risk committee to be there. Well, they weren’t there. So my first question to the person who did chair the meeting, the CEO, Mr Savage, was, well, “Where are the directors?” The answer was, well, they couldn’t make it because one of them was on holiday and I don’t where Mr Barnes was. So the seating of the AGM day is in the hands of the board. If they felt they couldn’t make this meeting on January 7, surely they could have called for the meeting on a later date, maybe towards the end of January? They normally have their meeting in the first or second week in December, and then they close off their year. They just say that the financials came out late. But then you can move your AGM. As long as you get your financials out, you can move your AGM to whatever date.
So anybody in his right mind would expect that the chairman would chair it. The only people we had there were the executive committee, the executive directors.
NOMPU SIZIBA: Your responses do give us a sense, but what are your views on the Purple Group’s current governance structures, and the extent to which they are compliant with King IV principles, which JSE-listed companies are supposed to adhere?
THEO BOTHA: They basically say they have this register on their website. I actually tried to find the register, and couldn’t really find it. So my viewpoint, barring what they say in the register, is that their non-compliance on the first degree would be that most companies would put forward their remuneration report, and they would put forward their remuneration policy. This company put forward the policy but never put forward the report for a non-binding vote. So there they never complied with King.
You would then look at the composition of the audit committee. Basically the composition of the audit committee – King advocates that its independent non-executive directors are committee members. Here Mark Barnes is one of the members. The excuse they furnished was that it’s a smallish company and you could only get two independent directors. I can sort of accept that reason, but what I can’t accept is the fact that most listed companies would always put forward their audit committee members every year to the AGM and to the shareholders to vote. This company doesn’t do that, and that’s a ruling in terms of the Companies Act. So I asked them why they didn’t do that, and they didn’t know why they didn’t.
So I think from a governance perspective they have a problem in the sense that I don’t think they have a great issue of good corporate governance. They now need to look at that, being that two of the directors – Mr Alter and Mr Lubner – are off the board. Mr Alter, just for interest’s sake, has never attended any board meetings or committee meetings for the past four years, and yet the board decided to put his name forward for re-election. How can boards decide to do that, where a director doesn’t attend any meetings? You’ve got to kind of understand the thought process of Mr Barnes – and this is what he is doing. If it’s a lack of governance here, would there be a lack of governance somewhere else he serves? I don’t know. But I’m definitely not looking at good governance here in terms of King IV.
NOMPU SIZIBA: You’ve asked a lot of questions that hopefully they will be willing to try and answer – also on a public platform.
THEO BOTHA: I think what they need to do is issue their minutes of the meeting. That’s what a lot of listed companies don’t do. They need to put those minutes out so that every single shareholder can see what questions I asked, and then the shareholders can see the response. Then let the shareholders decide. I think that’s the transparent way of handling my few points. There are a lot of issues that haven’t been addressed in terms of corporate governance and the lack thereof. The only person who should accept responsibility for this is Mark Barnes.
NOMPU SIZIBA: Alright Theo, we are going to leave it there. You’ve raised a lot of questions that need answers, not just for yourself but for other shareholders as well. Thank you for your time and your insights.