Sasol has been slammed for double-standards in its approach to remuneration, with an activist shareholder group noting that as part of Business Leadership South Africa the chemicals and fuels giant has urged government to rein in public sector wages – while at the same time it is paying out excessively generous fees to its own non-executive directors.
“The level of increases in non-executive directors’ fees over the past decade [is] excessive,” writes Active Shareholder in its proxy advisory report ahead of the upcoming Sasol annual general meeting (AGM).
Active Shareholder is a not-for-profit company that acts to “help socially-responsible shareholders exercise their company rights.”
The out-of-town allowance that will be paid to non-executive directors for attending just one board meeting during the current financial year will exceed Sasol’s minimum annual wage of R221 146. “This is totally unacceptable given that employee salaries have been frozen and the company is part of a call to halt government salary and wage increases,” said Bishop Jo Seoka, chairman of Active Shareholder, a proxy adviser to ethical investors. “What message are they sending to their staff?” asked Seoka, who said this sort of behaviour seems to him to be unethical.
Seoka says the additional hundreds of thousands of rands that non-executive directors stand to collect from the out-of-town allowances paid for this year’s four scheduled board meetings, makes a mockery of claims that the company is concerned about pay inequality.
The allowances were approved by shareholders at the 2019 AGM, but 2021 will be the first year they are due to be paid out.
The allowance is over and above the cost of travel and accommodation, which is paid for by Sasol.
Sasol is the second large South African-based multi-national company to announce generous out-of-town allowances for its non-executive directors. Earlier this year Naspers announced it would be paying its non-executive directors a daily allowance of R62 500, “when traveling and attending meetings outside home country”.
The Sasol allowance is based on the time spent flying to the board meeting and will vary from R86 800 to R260 400 per board meeting. Sasol’s remuneration committee explains that the allowance “is a travel fee which is to compensate for the inconvenience, as well as all costs associated with the travel” excluding flight and accommodation costs which are covered by Sasol.
The remuneration report refers to the increased focus on pay gap reporting across the globe, which, says Sasol, many consider to be a measure that promotes a fairer and more equal society. “This rings hollow when a non-executive director is paid more as a travel allowance than a worker is paid for a full year’s work,” says Seoka.
Active Shareholder is also irked by remuneration committee chairman Mpho Nkeli’s comment in her remuneration report that, “There is no doubt that in the new year all of us will need to reset our expectations and look as reward-related matters in a different way”. Active Shareholder’s head analyst Mike Martin says there’s little evidence of such a reset in Sasol’s approach to remuneration.
Martin points out that while this year’s fees – excluding allowances – will not be increased,
…Sasol’s non-executive directors’ fees have shot up 300% over the past ten years. This is considerably more than the inflation rate in SA or the US over that period.
In a move that echoes concerns raised by Just Share earlier this year, Active Shareholder recommends voting against the re-appointment of Trixie Kennealy and Nomgando Matyumza to Sasol’s audit committee. Both Kennealy and Matyumza also serve on the Standard Bank Group board and its audit committee. “We do not favour directors serving together on the boards of different companies as this can be too cosy and comfortable. It is of particular concern when it comes to the audit committee,” says Martin.
Seoka urged institutional investors to take responsibility for their investments and not let boards run companies for their own benefit rather than that of the millions of ordinary investors.