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Naspers AGM: The antithesis of shareholder democracy

But the group is the gift that keeps on giving in terms of returns, so nobody rocks this extremely valuable boat.
The firm pays its non-executive directors a daily out-of-town allowance of R62 500, and says of its remuneration policy that ‘societal fairness is very important to us’. Image: Dwayne Senior, Bloomberg

When considering the results of Naspers’s annual general meeting (AGM)it might be worth remembering that the bulk of the group’s value comes from China and, to a lesser extent, Russia. This might make it more palatable to contemplate the utter lack of democracy in the group’s shareholder meetings.

Private shareholders through two private companies control 73.3% of the votes at a Naspers shareholders’ meeting. This means holders of the 435 million N ordinary shares are essentially wasting their time pitching up to vote at these meetings.

The holders of the just under one million Naspers A shares (each share has 1 000 votes) will prevail no matter what.

At Friday’s AGM, some 344 million of the N ordinary shares were represented and an unprecedented 88.1% of them voted against approving the general authority to place unissued shares under the control of the directors.

This should have killed the resolution but, thanks to the fact that the A shareholders vote as one unanimous block and always vote 100% in favour of resolutions, it was passed with an overall 69%.

The group’s controversial remuneration policy was opposed by 62% of N ordinary shareholders, and the remuneration implementation report by 63%. But, again, thanks to the A shareholders, both resolutions were passed by over 73% of total votes.

An extremely unpopular policy

The A votes against each of these three resolutions were higher than the previous year, which may have caused some passing discomfort for the board, but probably nothing more. In the case of the two remuneration-related votes it will have to engage with the shareholders for a little more tweaking of what is evidently an extremely unpopular remuneration policy.

But all in all, a Naspers shareholders’ meeting is, appropriately enough, more like the annual gathering of China’s rubber-stamp parliament, the National People’s Congress, than a traditional shareholders’ meeting. But in terms of returns, Naspers is the gift that keeps giving, so nobody is rocking this extremely valuable boat. Just as the vast majority of Chinese is happy to accept their one-party dictatorship as long as the economy keeps growing.

Despite this stark reality, a full 79% of N shareholders did make the effort to vote at Friday’s AGM. Some even attended the meeting and asked questions.

CEO Bob van Dijk told the few shareholders who raised pay issues that the group’s compensation is “very much focused on pay for performance” and that the competition for talent “is fierce”.

When asked whether the group’s remuneration is “fair and responsible”, Aileen O’Toole, an executive of a company that pays non-executive directors a daily out-of-town allowance of R62 500 (30% more than South Africa’s minimum annual wage), replied that “societal fairness is very important and something we take very seriously.”

Local benchmarking of remuneration

O’Toole, who is Naspers’s ‘chief people officer’, added that benchmarking is done locally and that health and safety issues are overseen at local level.

Coincidentally, remuneration committee chair Craig Enenstein, in his description of the group’s remuneration policy, had earlier also told shareholders that “societal fairness is very important to us”.

Prosus Finance director Basil Sgourdos told shareholders who asked for better tracking of the Naspers share price to its underlying net asset value that management would consider providing it on the group’s website, “if it makes sense and it can be contextualised correctly”.

Read: SA stocks plunge as Tencent fall hits Naspers and Prosus

Despite the listing of Prosus there has been no progress in reducing the discount between the Naspers share price and the value of its 31% stake in Tencent, which is regarded as one of the key measurements of management’s performance.

Luister na Ryk van Niekerk se onderhoud met Protea Capital Management uitvoerende hoof Jean Pierre Verster:

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Beware of the “Chinese bearing gifts” is my only comment!

The directors of this company have not demonstrated why naspers should exist in its current form. They have had more than enough time to close its discount to its sum of parts. Instead the market’s lack of faith is shown by a growing discount. The company is worth substantially more dead than alive. The directors need to recognise that and do the right thing. It is time to stop tinkering at the edges as they have done recently by for example interposing value destructive additional holding structures and m & a tinkering in a frothy m & a market. Give the assets back to shareholders. They are theirs’.

PSG’s Jannie Mouton attempted a hostile takeover of Naspers through the attempted purchase of the controlling Keeromstraat shares, but had to let it go after some fancy footwork by Bekker. interesting reading in financial journals 2005/6. Also see financial Times 6 Dec 2006.

It’s really more a case of keeping dead industries within the Naspers stable alive.

Print media like Media24 that has been bleeding for decades is still alive and well due to cross-subsidisation from the Tencent revenue stream. There are reasons for that, but realistically there is no way that Media24 should still be around.

Their new attempt at premium articles is also doing a lot to kill off the last few loyal to reading their pages.

Yarwell no fine – another of my comments removed?

Moneyweb keeps knocking Naspers at their peril = don’t be too surprised one day to see that they have taken you over and disposed of you!

But their power is derived from a passive holding of an investment made over a decade ago.

How should the performance of this executive team now be judged?

1 By the performance of the passive tencent holding?
2. By the performance of the entities they actually control?
3. By their recent investment decisions eg to dispose of some of the tencent stake at a much lower price than is currently the price?
3. By tinkering around with holding structures that have widened the discount?

The bonuses paid to the execs can only be justified if you think that (1) alone is the right criteria. And that means you are prepared to overlook the ability of shareholders to buy tencent directly. Such an assessment would also not justify its continued existence in its current form. The structure costs shareholders not receiving executive bonuses billions.

”The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them”

If you exclude one of the elements as listed above – its not a CPI anymore.

”Economists use many different methods to measure how fast the economy is growing. The most common way to measure the economy is a real gross domestic product or real GDP. GDP is the total value of everything – goods and services – produced in our economy”

The same priciple applies for the Naspers performance – it is what it is!

Agree. I have noticed the onslaught too.

The issue with the “cpi argument” is that it doesn’t address the fact that the naspers share price would double if they announced the company will be wound up. That alone indicates the current market assessment of the value being added by directors keeping the company in its current form. The control structure is being used to preserve the increasingly cumbersome corporate form. If the cpi argument was truly valid would the control structure be required? Whose interests are being served by it?

The CPI argument also omits the very real influence investor perception has on the share price.

I did a quick little exercise on the gift that just keeps giving:
Comparing the combined Naspers/Prosus share price to that of Microsoft (just as an example of a good tech staple) and Tencent over the past 7 years, to my surprise Naspers(+Prosus) did in fact outperform both the Tencent and Microsoft share price over that period.
BUT once you take into account the strengthening of the USD and HK$ against the Rand over that period, both Tencent and Microsoft outperformed Naspers/Prosus over that period, in Rand terms, by an even greater margin.

End of comments.

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