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Perceptions, interpretations and executive insensitivity

Independence, share awards, shareholder engagement and bonuses – news from the Naspers, Pepkor, Astral Foods and EOH stables.
From the way bonuses have been dished out at EOH you would think its recovery was a three-person affair. Image: Moneyweb

Does anyone really believe that Steve Pacak is independent when it comes to Naspers? It seems the Naspers board does. Which is why they’ve gone ahead and named him chair of the audit committee.

But could anybody outside the cloistered confines of the Naspers board and its corporate governance advisors believe Pacak is independent? Pacak joined Naspers all the way back in 1988 and was CFO from 1998 until his retirement in 2014. Since then he has remained on the board as a non-executive director. There is no doubt Pacak has played an important role in Naspers’s growth and equally, no doubt, that he is an extremely valuable member of the board. But is he independent?

If you adopt a very legalistic approach, then Pacak is independent.

The Companies Act merely requires that he has not been involved in the day-to-day management of the company for the past financial year and that he has not been a full-time employee for the company for the past three financial years.

The King IV code is much more wishy-washy when it comes to defining independence. Audit firm Deloitte (of Steinhoff and Tongaat fame) notes that King IV takes “a more practical approach” (than the Companies Act) and focuses on the perception of independence.

“As such, factual independence or a tick-box approach is replaced by a much more balance assessment of independence with requires consideration of substance over form.”

As every investor in South Africa knows by now the audit committee plays a key role in any company. This is why, as Deloitte’s note on the subject reminds us, the independence of its members is so important. “It is down to the board to determine if a director is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the director’s judgement.

“The yardstick for purposes of this assessment will be the perception of a reasonable and informed third party,” says Deloitte.

It goes onto explain that a key question to be answered is whether or not the director has an interest, position, association or relationship, which “when judged from the perspective of a reasonable and informed third party is likely to influence unduly or cause bias in decision-making in the best interest of the company”.

Not only has the vast majority of Pacak’s life involved Naspers but given the phenomenal performance of the share, it’s extremely likely that just about all of his considerable wealth comes from Naspers.

Pacak’s appointment will be voted on at the group’s AGM later this year.

This should be the opportunity for reasonable and informed third parties to express a view, but Naspers has made so many of its shareholders (and executives) so rich that the ‘third-party’ perspective needed for vigorous corporate governance could be a bit blunted.


Meanwhile over at Pepkor the top three executives have been awarded tens of millions of rands of shares at zero cost.

Group CEO Leon Lourens was awarded R21.1 million worth of shares, Group CFO Riaan Hanekom R14.5 million, and Pep SA CEO Jaap Hamman R11.8 million.

The shares will vest with the three executives on the third anniversary of the award (March 3, 2024) subject to the achievement of performance criteria.

Getting them at zero cost means there’s no chance of the executives being caught short as they were with the tranche of Pepkor shares that were exchanged for Steinhoff shares in 2015.

In 2011 Pepkor executives used a R500 million Pepkor-guaranteed loan to take up shares in an executive incentive scheme. That loan, and all its grim consequences, was revealed to the public after the implosion of the Steinhoff share price in December 2017.

Astral Foods

Astral’s remuneration policy continues to make history.

Following on CEO Chris Schutte’s outspoken criticism of shareholders who voted against the food company’s pay policy at the recent AGM, shareholders with a hefty 27.45% stake engaged with the company. That’s about 26% more than usual. They may have been enticed by Schutte’s dare-you type of invitation.

As it happens the 27.45% stake was held by just two parties and it appears the ‘engagement’ involved nothing more than submitting reasons why they voted against the policy.

In whose world does that constitute ‘engagement’?

Perhaps it’s time the JSE added some detail to the requirement that companies ‘engage’ with their shareholders.


EOH CEO Stephen van Coller has managed to fritter away a chunk of the kudos he rightly earned by rescuing a company that had been brought to the brink by corruption.


There is no doubt EOH is now a far more sustainable company than it was when Van Coller took over in September 2018, and certainly he and his top team deserve to be rewarded.

But dishing out short-term bonuses, particularly non-performance-related bonuses, at a time when the ‘ordinary’ employees have been forced to endure a pay freeze seems remarkably insensitive.

The executives’ bonuses more than made up for the Covid salary cuts they took. Van Coller himself was set to enjoy a 61% pay increase for 2021 but turned down a special R3 million bonus and was left with an increase of 28%.

Surely the remuneration committee could have come up with something more nuanced to deal with the situation?

Something that would have included recompense for the efforts of all the employees and made EOH’s recovery seem less of a three-person affair.

Could it be that EOH shareholders are peeved about it? Last week, as a result of shareholder pushback, the company had to abandon a general shareholder meeting scheduled to secure approval for its 2020 share plan. The meeting had been called just a month earlier. Now the board is planning further consultations with shareholders.

Let’s hope they come up with something more considered and ethical.

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Well, Ann, you’re not wrong when you shine a light on boards and executive management. But what are they supposed to do? Is it not to increase the value of shares? Where then, in this equation, do employees, the environment, society or customers feature? They don’t, except as a useful tool to increase the value of shares and as a PR gimmick. I promise you that if an executive’s remuneration is dependent on rescuing lost dogs, there will be zero lost dogs in this world. However, that is not how it is set up. Boards want valuable shares and executives want the shortest route to insane riches, which is achieved through the increase in the value of shares. Capitalism this is not, for capitalism, in its purest form, comes down to bartering freely and fairly, without the hindrance of restricting laws. It is not the toxic blend of regulations and laws we currently have, steering bartering (or money making) in a very specific direction, benefitting only the elite. Our current form of capitalism only uses greed as an incentive (which will get you what we have), but there are other forms of capitalism that is based on more nobler incentives than greed. For too long (especially during the boomer age), we have equated capitalism with greed. It should be clear that greed is the worst of the incentives that should be used to guide the actions of humans, for it can only lead to inequality, corruption, loss of morality and incentivized plunder. Perhaps it is just who we are as humans and therefore inevitable, regardless of the economic system.

Batman : find me a remuneration committee in any company that includes in its objectives : we will pay the hired help the average / median / mean reward.

When EVERYBODY says they want the top quartile managers the mathematical outcome is NOT linear.

Also: for some weird reason none of this drama exists in founder-run companies. It is only the companies run by hired help that have offensive pay. Perhaps because the hired help wish they were founders? Or as successful as founders? The hired help confuse success and wealth.

Anyway : we can vote with shares. If you don’t like the culture, sell and buy something else. There are at any given time half a dozen worthy prospective shares for any one share that you used to love.

Ah, but you see, that’s where you are wrong. I used to be a human resource manager and I can tell you that it was not written down as an objective, but it was an unwritten rule to not pay the worse, but also not the best… except when it came to the very top, where all of a sudden they had to have the best and that could only be achieved by ridiculous bonusses, share schemes and salaries, reserved for the people at the top. Then it suddenly was non-negotiable and stated as a remuneration policy. How come it is fine to pay the very few at the top the big money, but the people, who actually make the business function, must be happy with the average? No sir, it’s just people myopically looking after their own selves. The elite looking after their elite friends. A very difficult club to break into.

End of comments.





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