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Calls for greater transparency on remuneration at Coronation AGM

Directors reluctant to make any concessions.
Shareholder activist Theo Botha says the company's disclosure has improved but still lacks transparency. Picture: Moneyweb

The willingness of Coronation Fund Managers (CFM) to engage on remuneration issues was thrown into the spotlight at the company’s AGM on Tuesday.

Shareholder activist Theo Botha, who has been painstakingly chipping away at the asset manager’s remuneration disclosure for years, told the AGM that he had asked in writing for trustees of the group’s deferred remuneration trust to provide deeds to shareholders but to no avail. The trust is responsible for the 30% of pre-tax profit invested in Coronation shares and unit trusts and used for cash allocations and deferred remuneration. This amounted to R588 million in the last financial year, while the fixed component of remuneration of the group’s 331 employees increased by 14% to R217 million.

CFM chairman Shams Pather, who is also a trustee of the deferred remuneration trust, indicated that the trust was independent and that shareholders should approach it directly.

Through his lawyer, Botha had emailed the trust’s chairman, advocate Tony Crookes, in June and August last year but didn’t receive a response. Pather, who was asked by Botha at the AGM to confirm whether he was aware of this communication, said he would not answer Botha on behalf of the trust but did indicate he would speak to Crookes and ask him to respond.

Botha praised CFM for improved disclosure on some remuneration issues such as key performance indicators but asked if changes to a long-term share scheme would be put to shareholders to vote on, and said that directors should ask for shareholder approval in the interests of full disclosure and good governance.

Directors were reluctant to make any concessions on this and other calls for greater transparency. Botha said that he had been making such requests of CFM since 2015. “Only when you put forward a policy document can we enter into a discussion on the pros and cons of that policy. I don’t think there is anything harmful in asking, I don’t know why I am getting some form of kickback.”

He also asked why CFM only disclosed remuneration of the CEO and CFO, and not other prescribed officers such as the CIP. Board member and former CEO Hugo Nelson said the way CFM disclosed “is the way we have chosen to disclose” and directors believed it was comprehensive and aligned to the interest of stakeholders, and this was “an agree to disagree scenario”.

CEO Anton Pillay pointed out that there was only a 1% increase in the group’s total employment cost, “which talks to the variable remuneration structure we have in place”.  

Botha told Moneyweb that he has asked for the trust deeds, a simple document of rules and regulations of the trust, and was ignored. “Why can’t shareholders see these rules?” he asked. “If changes were made, why weren’t they put to the vote?”

Botha told Moneyweb that CFM’s disclosure has improved, “but it should be transparent as the biggest investor on the JSE and one which is holding other companies to account”.

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Coronation is no longer the dynamite company it once was. There has been a very clear cultural shift in the way they do and think about business.

The ABIL, Steinhoff and New Look bond fiascos speak clearly to the lack of ability in their team’s stock picking. I hear also that all analysts are now permitted to fly business class instead of economy class (a recent change in the last year or so). At shareholders expense of course.

Not to mention the gross overpayment of mediocre at best fund managers and analysts. Just look at their global funds’ performance. Haven’t outperformed the index over any measurement period.

The shift to passive investment globally is only going to accelerate in SA. Long gone are the days of enourmous fees. The listing serves no purpose other than to reward employees with stock. Why should it be listed? It has no need for capital.

Stock to fall much further over the coming years as fees compress and passive overtakes active management.

Theo Botha opened my eyes about CFM and substantial funds belonging to my group companies were withdrawn and moved elsewhere.

Thanks Theo – you are the best and most reliable ‘investment adviser’ I have – not that you advise on investments but rather point out irregular matters for all companies.

Moved elsewhere to a fund manager where I guess you have no idea about how the portfolio managers are remunerated.

Their Assets Under Management (AUM) have been falling (not so long ago in region of about R630 billion, now about R555 billion, if my memory is correct), while that of Sygnia’s AUM have steadily been rising.
https://www.sygnia.co.za/shareholders/assets-under-management

Why this hugely discrepant performance in AUM?
Active to passive flows? From underperformers to indexers/passives/ETFs.

Same as global trends?
https://www.bloomberg.com/news/articles/2018-12-31/shift-from-active-to-passive-approaches-tipping-point-in-2019
https://www.morningstar.com/blog/2018/03/12/fund-flows-charts.html
https://www.thenational.ae/business/money/the-shift-from-active-to-passive-will-cross-the-line-this-year-1.809559

What odds that they will beat the SPIVA odds?!!
https://us.spindices.com/spiva/#/reports

Any bets on what these 2 companies’ growth and share performance may look like in 10 years’ time?

Can Coronation’s AUM go below R100 billion?

Spot on EBG. There is a reason this one is sitting on a 10% dividend yield. It ain’t going anywhere until a sustained bull market returns.

Never to entrust any dime to CFM…the secrecy and unwillingness to respond as well as the delay clearly show there is very little honesty and integrity.

Given that their recent PR campaign, particularly the TV ads, were based on the concept of “trust” they are shooting themselves in the foot
with their refusal to be transparent on this issue. Then again I have not seen the “trust” TV ads for some time. Maybe someone took issue and accused them of false advertising?

Come now boys and girls. Talk down in the Chardonnay estates is that some of the C level Coronation boys doubled down LEVERAGED when Steinhoff hit R18. In their personal capacities, not client money.

They NEED the money!

I must concur with some of the comments in response to the article.The recent Coro investment roadshow was one of the most underwhelming presentastions i had been to for a while,notwithstanding the depressed markets(a complete waste of time).The fund managers lacked any real enthusiasm and if you look at particular the Abil and New Look investments,you start to question the ability of the management team.Abil was a clear case of dereliction of duty and being taken in with Cowboy Kirkanis.Their has been a massive reported outflows for some of the funds.I cant see them being factor for the foreseeable future.The article about remuneration disclosures also does not inspire confidence on Coronation.

Buddy-Buddy system amongst investment houses and big business is still operating.

In the 1980’s(86/87) etc you could become a CA if you got a C(SG) or D(HG) for maths.

Explains a lot.

Back in those days a D(HG) was a bloody good mark!

Mr Pather has really not conducted himself at the level of a listed company chairman here. Mr Botha s requests were polite, reasonable and transparent .
Mr Pather was evasive, vague and given the colossal value destruction in Coronations share price( as well as poor fund performance)he could have taken shareholders into his confidence.

Well done to Mr Botha to have the strength of character to test these somewhat oily practices. Mr Pather-I remember you well at Southern Life-you were a portfolio manager( an unexceptional one)

I bet you very few people know how the portfolio managers running their funds are remunerated. While I know Coronation is a listed fund manager, why the desire to know how and what they paid? All you need to know is that they are well paid and incentivised. One thing is that the ability to retain top talent is important for all fund managers so why should Coronation give this away if it has helped them retain their people? All the disclosure will do is allow other fund managers to cherry-pick some of Coronation’s professionals so why do it. Both sides have valid arguments but why be so insistent on information for Coronation that you don’t care about with any other fund manager.

Why is it different from any other company on the JSE where investors (including CFM) believe that it IS important to understand how executives are remunerated?

You are thinking of CFM as a client, not as an investment. Similarly, a Woolies customer isn’t interested in how a Woolies executive is paid, but a Woolies investor is.

End of comments.

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