As Old Mutual suspended its chief executive officer Peter Moyo on Friday, then announced it had decided to “separate” with him, shareholders stunningly rejected the remuneration of the company’s executives at its annual general meeting (AGM).
The non-binding resolution on the implementation of the remuneration implementation report, in other words what it paid its executives in 2018, was rejected by 69.13% of shareholders who voted at the AGM. Only 30.87% voted in favour.
This is only the second time that shareholders of a JSE Top 40 company have outright rejected a company’s remuneration. The first instance was at Shoprite’s October AGM, where ordinary shareholders voted overwhelmingly against both remuneration resolutions: the policy and its implementation. Both passed overall thanks to the high-voting deferred shares, a structure the group is trying to unwind.
Old Mutual’s non-binding vote on its remuneration policy received 54% of votes in favour. This is below the 75% required.
Last year, Moyo was paid a total of R50.571 million.
This included nearly R14 million in distributions from the unbundling of Quilter plc and Nedbank – something described by the group as an “unintended consequence”. He also received a R4.92 million sign-on bonus in 2017.
Chief financial officer Casper Troskie, who joined Old Mutual from Liberty at the end of March 2018, was paid a total of R20.626 million last year. Included in this was a R4.7 million sign-on bonus “in respect of unvested share awards which will vest in three tranches with no prospective performance conditions” and a buyout award of R2.43 million (also with no prospective performance conditions).
The estimated fair value of Moyo’s shares under various incentive programmes (as at December 31) was R31.5 million, while Troskie’s was R10.9 million. Both included certain tranches of their respective buyout awards.
‘Managed separation’ incentives
As part of the group’s long-term incentive plans, once-off share awards were granted in a Managed Separation Incentive Plan (MSIP). This was “to align the senior management team with the completion of the Management Separation of the Old Mutual plc Group within a specified period, with the overall objective of unlocking value for shareholders”. Half of these awards were settled in cash, while 50% were deferred into forfeitable shares which vest in September this year.
This award is curious in that the bulk of the managed separation work predates the executives in charge of Old Mutual Limited (and was done by Bruce Hemphill and Ingrid Johnson when they headed up Old Mutual plc).
The two largest shareholders in the group, as at December 31, 2018, are the Public Investment Corporation (PIC), with 10.8% of ordinary shares, and Allan Gray (7.81% of ordinary shares, on behalf of its clients). With such a low vote in favour of the remuneration resolution, as well as historical voting patterns, it is almost certain that both voted against.
The group’s own asset management unit, Old Mutual Investment Group, voted against the resolution.
It says this was warranted for four reasons:
- The company has granted transaction-related awards which are not supported by a compelling rationale;
- The CFO received a sign-on bonus and a buyout award which are not adequately explained;
- LTIP [long-term incentive plan] awards granted during the year appear to feature performance periods of less than three years and targets have not been disclosed prospectively; and
- There is scope for better disclosure around the operation of the annual bonus.
This is the first time shareholders have had to vote on both the remuneration policy and its implementation (as per King IV), under the JSE’s listing requirements. Previously, as a UK-headquartered company with a secondary listing on the JSE, shareholders only had to vote on the directors’ remuneration report (specifically excluding the policy). Last year, this (ordinary) resolution received 71% of the votes cast in favour.
PIC still ‘dissatisfied’
The PIC voted against this resolution last year, saying that it “has always expressed its dissatisfaction of the Managed Separation Incentive Plan (MSIP), as well as the magnitude of the rewards which are viewed as unjustified, and the impact it will have towards executive remuneration. The PIC voted against the remuneration report as it includes the implementation of the MSIP.”
Old Mutual says, given that the two resolutions “received less than the required 75% of votes, [it] will directly engage with shareholders, the timing of which will be advised to shareholders in due course”.
Hilton Tarrant works at YFM. He can still be contacted at email@example.com.