Executive remuneration: TFG’s misunderstood shareholders and a cheeky move at Old Mutual

Musings on the retailer and insurer both failing to get approval on remuneration policies, as well as a brief look at developments at Prosus, Ayo and Shoprite.
Image: Supplied

Evidently Michael Lewis, chairman of The Foschini Group (TFG), is not one bit pleased with his shareholders.

At the annual general meeting, held last week, he expressed considerable disappointment that a large chunk of them continued to “misunderstand” the group’s remuneration policy.

The disappointment was triggered by the voting results showing that 36% of shareholders voted against the group’s remuneration policy and 44% voted against the remuneration report.

Although this was the third year in a row that the remuneration policy failed to get the all-clear from shareholders, the board faces no consequences other than having to ‘engage’ with the dissenting shareholders.

The TFG board may have to come up with a different approach to its engagement strategy given its evident failure to date.

“It was anticipated that this ongoing, deep and transparent engagement process would yield the desired results of minimising the risk of any misunderstanding and surprises by shareholders,” Lewis told shareholders at last week’s meeting, according to a report in Business Day.

The following day TFG released the voting results with a lengthy narrative essentially describing how the shareholders just don’t get it.

“The responsibility of shareholders is to act as a responsible investor and vote at the AGM on an informed basis on the remuneration policy and its implementation,” said TFG, adding that the same was expected for other resolutions.

So, the board must also have been put out by the 42.44% vote against the re-election of Ronnie Stein as a member of the audit committee.

Membership of that committee is reserved for independent directors. TFG classifies Stein as ‘independent’ although he is the former CFO and has served on the board for 22 years.

But getting back to the remuneration challenge, it seems the remuneration committee, accompanied by the company secretary and a remuneration specialist, held multiple separate formal engagements with the group’s largest shareholders during the year.

Read: Institute of Directors weighs in on the ‘dilemma’ of executive pay

The process was designed to pro-actively discuss all key features presented in the remuneration report “and elicit their guidance and input into the design of all proposed significant changes to the remuneration policy, prior to implementation of any such changes.”

According to the board, none of these engagements highlighted areas of disagreement that weren’t adequately addressed.

Nevertheless, a hefty chunk of opposition was recorded.

It is remarkable that despite 7 of TFG’s “top 8 shareholders” voting in favour of the remuneration policy, such a large block of shareholders ended up opposing it.

And although six of those “top eight” voted in favour of the remuneration implementation report, it was opposed by 44% of shareholders.

This suggests that shareholders outside that clique of “top shareholders” represent a relatively large and activist force, which is encouraging news for governance although apparently frustrating for the TFG board. But it also suggests TFG is engaging with too selective a group. It may be talking to a club of like-minded individuals.

Perhaps it should open up to the outspoken shareholders on the fringe.

And perhaps the remuneration team could have persuaded these shareholders of the need for a “bold and competitive” (this is usually code for generous) remuneration policy to deal with the poaching of their skilled employees.

They might have told these shareholders how many employees are involved? What do their exit interviews reveal? What is the company doing to develop management talent amongst the thousands of employees it has? Who are the companies doing the poaching?

But Lewis is right to highlight the serious and seemingly intractable problems around the issue of executive remuneration and the central role that institutional shareholders play as enablers.

There are no adverse consequences for making excessive rewards; the addition of ‘malus and clawback’ provisions in recent years is a hoax used to encourage acceptance of ever-larger awards.

Has there ever been an attempt to clawback remuneration, other than from Steinhoff’s Markus Jooste and Ben la Grange?

Perhaps institutional shareholders should consider imposing penalties on companies that poach executive talent instead of developing their own.

On the issue of institutional behavior vis-à-vis executive pay, it’s puzzling that Old Mutual waited three months before inviting its shareholders to engage with the remuneration committee about their concerns.

At the AGM on May 21 only 54.45% of shareholders voted in favour of the remuneration policy and only 67.5% voted for the remuneration implementation report.

Old Mutual is generally alert to ESG matters but seems to struggle with remuneration.

This is the fifth consecutive year it has not had its remuneration approved – two years as Plc, when it still had its primary listing in London and three as Ltd back in SA.

And the quality of engagement being offered looks rather mean-spirited – concerned shareholders must make written submissions to the company secretary.

Read: Executive pay and undeserved wealth

And having waited a full three months, Old Mutual has the temerity to instruct shareholders that those submissions must be received by next Friday.

Again, it seems the lucky large shareholders will be given opportunities to engage with the board during subsequent presentations, leaving the smaller players on the sidelines hoping their submissions won’t just be binned.

At Prosus and Ayo …

Prosus appears to be rushing to top up its portfolio of non-Tencent holdings before much more of the air escapes from the Chinese tech bubble. The prospect of a future without the Tencent golden goose, or one that is significantly less able to pump oodles of money to foreign investors, does heighten the need for a more substantial alternative portfolio that generates some profit.

Iqbal Survé-controlled Ayo has joined the club of the rich and powerful companies that believe the market is underestimating their value or believe there’s nothing better to do than spend their cash buying back their shares.

It does actually look more like a winning strategy for Ayo than for say, Anglo, Prosus or Naspers.

Ayo’s share price is flatlining at R3.50 with investors evidently far too nervous to heed the fact that its stated net asset value is R1 119.42.

Of course, that bloated NAV figure is entirely thanks to the R4.3 billion that the Public Investment Corporation pumped into the company back in 2017.

That cash is being slowly drained out of the company; using it to fund a share buyback should soak up a large chunk of it to the benefit of the remaining shareholders.

And, Shoprite… 

Finally, what do you suppose Shoprite is planning with the establishment of a new board sub-committee to be called Investco?

Christo Wiese will be chairman of the new committee; additional members are Wendy Lucas-Bull, Peter Cooper, Johan Basson and relative newcomer to the Shoprite board, Linda de Beer. This could be really interesting.



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These guys are completely overpaid as it is. What we actually need is well paid workers that spend their salaries and stimulate the economy

Overpaid based on what? TFG had total employee costs of R5.8bn for FY21 of which director’s remuneration was R38m. Given the pandemic and the competitive industry this seems like splitting hairs.. Go ask all the retrenched staff of Edcon what their view is on executive pay is..TFG actually might salvage some of these jobs through rescuing Jet.

Shareholders can as the owners do what they want and most certainly do not need to be lectured to about obligations and duties by the overpaid hired help that seem to miss their clear legal obligation to act in the best interest of the company, not the best interest of the board or its members!

As far as TFG goes, Mr Lewis has surrounded himself with a malleable clique of ex auditors from a defunct accounting firm ie Andersen Consulting. In fairness though , while the remuneration is high, these chaps have delivered pretty good numbers in shocking times. Also they actually run a business so I guess they deserve to be properly paid.

As far as Naspers/Prosus is concerned there are no excuses. The Keerom Street gangsters with excessive voting rights have no shame bulldozing a deal through and grossly overpaying a management team that destroys value daily. That a man with Mr Du Toits sterling reputation stays on a board peppered with such mediocrity, poor judgment and downright arrogance astounds me. I ask him publicly to exit the Chairman, replace him and restore some semblance of decency to that company.

The exec pay thing doesn’t bother me in the slightest.

Supply and demand will dictate. Are there a number of very lucky and well connected fat cats . Yes , but the nice thing about capitalism is that these things will sort themselves out. Nobody wants to overpay , so if you don’t perform you’ll get the axe

That’s some boomer talk right there, you should care that people earn R150k a day while the majority starve. You only need a basic understanding of world history, to see why shouting “Let them eat cake” never ends well, since Samaria to the Russian revolution, the overpaid never learn. And if you won’t do it for good, then do it for greedy. You will have a lot more customers all of a sudden if people earned something!

Why is this so hard for people understand

Why should I care that someone is sending 150k a day whilst someone else starves.

That’s why gets my about all the leftist communist people . They always focus on who has “too much” thinking those who have too much , must haven taken from everyone else.

NO !! These are 2 mutually exclusive things , some are not rich because others are poor (there is only one place where that is true , and that’s where communism present).

And no I’m not a boomer , I’m a millennial , that choose to worked hard and focused on what I must do to make a success . instead of complaining that everyone else is earning too much and asking for hand outs.

Methinks you lack the basic understanding of history. Firstly, the examples you listed were all monarchies..we live in in a democratic society with free enterprise. Secondly, just because a mob of people are angry that select individuals are wealthy, doesn’t make it justified. This is a major problem with the modern narrative, the angrier you are, the more right you must be.. Btw, I am also a millennial.

That might be true in a large, open and competitive system, but increasingly we seem to have in SA a closed loop of mutual backscratching, inappropriate benchmarking and generally talking each other up. You authorise my fat consultancy fee, I recommend your fat package. It’s the closest private sector analogue we have to the regime’s patronage network.

Come on guys, he really needs the cash right now and is why he gets “disappointed” that you don’t understand (Zuma also used this with “confused” every time something did not go his way). He has just recently married a Royal, Lady Diana’s niece in a fancy Italian Villa (probably also had to pay for a divorce) and all this cannot be taken from his capital. He has to keep up with the Spencer’s.

little investors should realise they are little . most invest cause they aint got the kahunas to start and run their own business . these listed co’s r selfserving .
i mean mr lewis has himself an expensive little piece to support

The tone of Michael Lewis’ rebuke of shareholders is astounding. This smacks of a company that doesn’t understand what actual engagement is. Meeting with shareholders to tell them why you are overpaying your executives, and actually listening to shareholders and incorporating their suggestions is not the same thing.

Just quite why an existing CEO needs to receive an additional R36.9m worth of shares as a restraint agreement above and beyond his base salary and existing STI and LTI remains to be explained. It truly beggars belief that TFG think this is remotely justified.

While not the case at OM, at the very least, shares with super voting powers should not have super votes applied on matters relating to executive compensation. Charlie Munger said Show me the incentive and I will show you the Outcome. If directors are more concerned about remuneration then stockholders which they may well be if they have a tiny number of shares but control (and board compositions and decisions are protected by a dual voting structure) the outcome will be high directors remuneration and stock prices trading at a discount as shareholders calculate the present value of future value destruction resulting from expected excess future remuneration.

I dont have a problem with executives being paid bonuses – but there should be an upper limit.

In my opinion nothing justifies bonuses of hundreds of millions of rands of shares or cash bonuses because an employee did what they are employed to do in the first place.

If executives want to earn unlimited amounts then they must start their own company and take the risks in order to achieve the big rewards.

If there was an upper limit on bonuses and share incentive schemes then executives couldnt be poached based on earnings alone and it would go a long way towards reducing the inequality in earnings in South Africa.

Perhaps limited to 100 times the annual earnings of the lowest paid worker…..

See how quickly the minimum wage rises…

I will pay each cabinet minister usd.10 mill. any time if they can grow the gdp at10% per year.Same in private sector make enough money for me,write your own cheque

End of comments.



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