JSE-listed Purple Group has made a quiet about-turn over a plan to pay non-executive chairman Mark Barnes R2.858 million for the year to end-August. This after shareholder activist Theo Botha first questioned this level on remuneration on Twitter in late December. Botha contrasts this with a list of examples of other JSE companies, including Long4Life, Metair, Metrofile, PSG Group, Bidvest, and Capitec. At all of these companies, remuneration of the non-executive chairs is significantly lower than at the far-smaller Purple, with a market value of R280 million.
In the announcement of the results of Monday’s AGM, Purple contends the non-executive director fees were “incorrectly disclosed”. It says the correct fees are an annual fee of R500 000 for the non-executive chairman (Barnes), together with 6% increases in fees for non-executives, as well as their meeting attendance fees. At the AGM, the group said there had been a remuneration committee meeting in November. Botha questions why – if this was the case – these corrected or revised fees weren’t circulated to shareholders.
Purple’s assertion that these were “incorrectly disclosed” seems curious, given that Barnes was paid R2.858 million and R2.697 million in the previous two financial years, respectively (2018 and 2017). In 2016, he was paid R2.4 million for his role as chair (which ran for seven-and-a-half months), itself an upward adjustment at the year-end AGM from the R1.99 million actually paid.
The change means Barnes, who is full-time CEO at the South African Post Office, will take a R2.36 million pay cut for his efforts at Purple this year.
Barnes, however, was paid an additional R2 million in 2018 for securing the R100 million investment by Sanlam into EasyEquities. This capital raising fee equates to 2% of the transaction value. This was put to a shareholder vote at the AGM (special resolution 3) and, while approved by 92.6% of votes, attracted the largest number of votes against of all resolutions (7.4%).
Purple Group Special resolution no. 3 Ratification of capital raising
fee paid to non-executive chairman Barnes, the non-executive Chairman of the Group was instrumental in securing the R100 million
investment by Sanlam. Should Mr Barnes be entitled to a fee for capital raising?
— Theo Botha (@tjbbotha) December 27, 2018
Botha has serious concerns over the precedent being set by “paying finders fees to chairs, whether they’re big shareholders or not”. The problem, he says, is that these parties cannot benefit on both sides. If this continues, “where do we end up?”.
“If Mark did a fantastic deal here, he will benefit as one of the biggest shareholders of the company.”
The group told shareholders present that Barnes had spent a “considerable” amount of time over 18 months to conclude the deal.
The AGM was described by Botha as one of the most surreal he had ever attended. Not only was Barnes not in attendance, the only directors present were CEO Charles Savage and CFO Gary van Dyk. Auditors BDO were not present, a situation described by Botha as problematic.
The group also withdrew a meeting resolution ratifying the re-election of Dennis Alter as a non-executive director, saying he was “no longer available to serve” this function. Botha, however, in late December questioned why this was being put to a shareholder vote given that Alter had not attended any board or committee meetings for the last four years.
In the 2018 integrated report, Purple says Alter “was not able to attend the meetings due to time zone complications, however, he has been actively involved in providing input throughout the year”.
After non-executive director – and major shareholder – Ronnie Lubner’s passing on December 27, 2018, the group’s board now comprises Barnes, Savage, Van Dyk, with a single independent non-executive, Craig Carter.
Botha also raised additional (and somewhat elementary) governance issues at the AGM, including the fact that Purple does not propose members of the audit committee annually at its AGM, that its Risk Committee is not compliant in terms of King IV and that the group does not put forward separate votes on the remuneration policy and its implementation (only a single one on remuneration as a whole).
The principal issue in Botha’s mind, however, is the absence of directors at the meeting: “Why have an AGM when there’s nobody there? We’d like to see the JSE look at this.”
The group says the absence of directors was due to the meeting being held later than normal (typically it is held in early December).
Botha would also like the bourse to look at the group’s King register to see if it is explaining why it isn’t adhering to certain corporate governance principles.
The group, in the integrated report, says a “register in terms of King IV, as well as a register in terms of King IV with King III evidence, can be found on the website at www.purplegroup.co.za”.
Neither Botha nor this writer could find this register.
“This is not an issue of whether it’s a small company or a big company,” says Botha. “If a company is listed on the JSE, it ought to have good governance.”
He has no particular axe to grind with Purple, describing what the group has done in terms of “democratising share ownership” through its EasyEquities platform as “rather exciting in a way. You would expect a dynamic company like this, to be dynamic in terms of governance issues as well.”
Hilton Tarrant works at YFM. He can still be contacted at firstname.lastname@example.org.