Naspers’ N shareholders unhappy with remuneration policy

Several fund managers continue to vote against resolutions.
Prudential, Allan Gray and The Old Mutual Investment Group voted against the media group's remuneration policy at the AGM last week. Picture: Moneyweb

The voting at Naspers’ AGM last week highlighted the concerns that many shareholders have over certain issues of corporate governance at the media giant. And calculations by Moneyweb suggest that the number of N shareholders that voted against the two most controversial resolutions may be even higher than other estimates suggest.

Moneyweb’s analysis found that just under 66% of N shareholders voted against the company’s executive remuneration policy. Almost 74% voted against the resolution to give directors control of unissued shares. This represents significant shareholder disquiet.

These resolutions still however passed comfortably because of the company’s dual-class share structure. The tightly-held A shares control 68% of the voting rights, and mostly these shareholders, who are closely linked to the company’s directors, vote as a block. So even when a majority of the remaining 32% show disapproval, it hardly matters.

It would however be remarkable if Naspers ignored what is clearly overwhelming shareholder sentiment. Particularly because these issues are not new.

Allan Gray went public with its intention to vote against the company’s remuneration policy before this year’s AGM, but this wasn’t because it was adopting a new position. Proxy voting records published on its website show that Allan Gray voted against Naspers’ remuneration policy in both 2015 and 2016. It has also consistently voted against resolutions to place unissued ordinary shares under the control of directors.

It is also far from alone amongst the country’s asset managers. The Old Mutual Investment Group makes its voting records publicly available immediately after any AGM, and it voted against both resolutions this year and last year. Prudential has also confirmed to Moneyweb that it voted against both resolutions at the 2017 AGM, as has Mergence.

Coronation unfortunately did not respond to Moneyweb’s request regarding its 2017 voting by the time of publishing, but last year it voted against giving Naspers’ directors control of unissued shares. It did however endorse the remuneration policy.

While this is far from an exhaustive list, it gives a picture of the sentiment. A range of asset managers representing large numbers of N shareholders have been voting consistently over a number of years against certain company policies that nevertheless continue to be approved.

The questions around executive remuneration have probably raised the most interest this year, but the issue of directors taking control of unissued shares is possibly the more important. As Mergence’s Peter Takaendesa explains:

“The placement of authorised but unissued shares under the control of management is designed and intended to give management unrestrained ability to issue shares for acquisitions or to fend off being acquired. The practice of issuing shares to acquire or avoid being acquired ultimately dilutes existing shareholders and in practice can result in significant wealth destruction.

“Mergence should thus oppose all unsubstantiated requests to place unissued shares under the control of directors,” Takaendesa said. “ Instead Mergence requests that they be entitled to vote on a case-by-case basis on specific resolutions requiring the allocation of shares under control of the directors such that the motivation for the issue of shares can be thoroughly assessed.”

Other asset managers expressed similar reasoning.

This and the remuneration issue raise real questions about the company’s share structure and what, if any, influence N shareholders are able to bring to bear. It would be extraordinary if any of these managers had not also engaged privately with the Naspers board on the issues it voted against. Yet it’s difficult to see what impact this has had.

How much of this is because Naspers’ dual-class share structure means that the board is actually only accountable to its A shareholders, many of whom are conflicted? That is a big question, and one that N shareholders are increasingly going to have to grapple with.

Note: The calculations made by Moneyweb take into account that although treasury shareholders were considered as present at the meeting, they were not able to vote. They do not assume that all A shareholders necessarily voted as a block on both resolutions.



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I would not call Mr Bekker the “dragonslayer”

What I would call him would be slightly less complimentary.

But, as with PW Botha and other dictators who treated dissenting media with disrespect, his ‘reign’ would end soon.

Again, i suggest shareholders take legal action to set aside some of the decisions based on his refusal to answer questions.

His assertiveness has made pensioners billions over the last 15 years. They, as management, have better insights into the businesses they’re building and the playing field they’re on. I’m happy with the way they put my money to work. If you’re not just sell your shares! And please get over your issues with the older generation Dutchies – they create thousands of jobs and pay tons of tax – it’s time to move on…

Keep on drinking the Kool-aid. He had one lucky break years ago, among all the failures. If it was talent, he would at least have had moderate success more than 50% of the time. In any case, that is besides the point. The points being bad governance and why should existing management keep on getting exorbitant bonuses, based on Koos’ past lucky break?

Your “just sell your shares” comment is as lame as “just leave the country” responses to somebody lamenting the bad state of affairs in our national “leadership”…

Oh, I think you forgot the ”broederbond” part today, Sir!

Sorry, you are right, of course – – – but I did remember PWBotha

I know, my comments are probably very boring and disappointing – – I suffered under those people and should learn to hold my tongue (fingers)

So who cares if Allan Gray and others are unhappy?

Just sell the shares and buy some Anglos or Sasols!

Nobody is indispensable!

”The graveyards are full of people the world could do without”

Elbert Hubbard (1856-1915)

You forgot to mention JCI…

To be continued…watch this space…September 13, 2017, methinks will set the Kebblegate, Investecgate and Randgold minority shareholders claims alive again!

Smoke and mirrors- lure investors in with big promises of delivery and management austerity, then when you have them hooked pay yourself huge salaries, bonuses share allocations etc etc
Remgro does exactly the same and all they are is a holding company
Investors must wake up and demand from management exactly what remuneration and other perks are intended over 1, 3 and 5 years etc.

How to destroy your reputation in an instant! So do we really know this person who is arrogant enough to shout his mouth off about governance as if he is untouchable. I suspect his financial wealth has,like the Gupta’s, made him feel invincible. So where does character, ethics and morality fit in here? Anywhere?

As a Naspers investor I am DELIGHTED with their performance. you cannot fault them on that. Naspers is making the management of a lot of JSE blue chips look overpaid and lazy.

Honestly, it looks like a minority of shareholders want to get control of Naspers for their own purposes a la Gupta.

Problem is ‘their’ performance actually isn’t from them – they made one good bet a while back and have been a one trick pony ever since.

You should be delighted Tencent ..not Naspers (there’s a difference between who’s actually creating the value and who just owns a slice of that value)

Tencent is an incredible business and your investment into Naspers is excellent exposure to Tencent (which should rightfully make you happy) – but Tencent’s performance shouldn’t cause anyone to ignore NPN boards decisions.

And check Tencents performance against the statistical probability that it will continue to perform as such. Valuations always come home to roost’s never “different this time” i.e. great company but valuations are stretched.

Milo go have a look at the shareholding structure and then define minority control, and who wields it. Referencing the Guptas makes zero sense when shareholders are only asking for more transparency and fairer accountability.

Let us compare Caxton vs Naspers. Moneyweb is owned by Caxton (do not know if it still is) I will be much happier owning Naspers than Caxton and maybe we should ask Alan Hogg (Biznews) his thoughts on Moolman and Coburn of Caxton fame.

Koos Bekker is not bothered. He made an investment that has left him and many investors not needing to work ever again. Why are you angry? You could just sell out…but you won’t. Tencent has a lot more value to add going forward.

Will Allan Gray, Sygnia or any other asset management house be so bold to launch a General Equity, Top 40, Top 25 and Dividend Fund that specifically excludes Naspers shareholding. The constituent weighting of Naspers has become too big in any such fund and the corporate governance issues too bothersome.

Capped SWIX takes care of this (mostly) by limiting all stocks (including NPN) to 10%.

Problem is weighing their returns against governance – forgoing returns may not be in the investors best interest, (so automatically excluding NPN is not necessarily a the ‘right’ thing to do).

Koos’s arrogance is a concern and should be taken seriously by asset managers

There is a simple way to avoid Naspers; invest directly in Tencent via Easyequities and obtain a far bigger return than investing in Naspers.

Have you noticed that Naspers have never paid a dividend? but TENCENT does. The Board of Naspers is incredibly arrogant.

Excellent article Patrick.

Investors know the deal when they buy ‘N’ shares.

Surely you mean “when they buy class A shares”.
Few investors own class N shares.

End of comments.



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