Sasol’s non-executive directors have offered up 20% of their board fees in what is seen as a bid to secure sufficient shareholder support for continued payment of their generous annual package of fees and allowances.
This follows Active Shareholder – a not-for-profit company that acts “to help socially-responsible shareholders exercise their company rights” – earlier this week issuing a proxy advisory note slamming the generosity shown to Sasol’s non-executive directors.
The unprecedented gesture comes just days before Friday’s annual general meeting, which could see shareholders demonstrate their frustrations about the massive value destruction of recent years by voting against key resolutions.
Failure to secure the necessary 75% approval for directors’ remuneration would not only be embarrassing and awkward, it would see Sasol make corporate history.
In terms of the Companies Act, without that approval, Sasol would not be allowed to pay its non-executive directors fees for any work done during 2021.
Section 66 of the Companies Act says directors’ remuneration “may be paid in accordance with a special resolution approved by the shareholders within the previous two years”.
Doing the bare minimum
Sasol’s non-executive directors’ remuneration has not been approved since its 2018 AGM.
Sasol is the only JSE company that does not put its directors’ remuneration to a shareholder vote at every AGM.
It adheres to the minimum requirements of the law and presents the resolution every second year.
Had it presented the resolution and secured the necessary support at last year’s AGM, the outcome of this year’s vote would not be critical as the directors could continue to be paid in terms of that 2019 approval.
A Sasol spokesperson confirmed to Moneyweb on Wednesday that the last time it tabled the necessary special resolution for approval was in 2018. “If we do not receive 75% of votes cast in favour of this special resolution, we will be, in terms of the Companies Act, unable to pay fees to directors”.
Directors’ fees generally receive overwhelming support from shareholders, even those who oppose the remuneration paid to executives tend to vote in support of directors’ remuneration. However criticism by activist shareholders about the steep increase in non-executive fees over the past decade – despite massive shareholder value destruction – has apparently raised concerns about Sasol being able to reach the necessary 75% level.
Board ‘agrees to commit’ to the sacrifice
In a Sens announcement issued on Wednesday Sasol said that in view of the significant challenges still facing the company and in acknowledgement of the erosion of shareholder value over the past two years, the board has agreed to commit to a sacrifice of 20% on the board fees proposed for approval at the 2020 AGM.
It also pointed to a possible change in the two-year policy, noting that: “The remuneration committee will ensure that a review of the fees payable to NEDs [non-executive directors] is carried out with the objective of ensuring that a new resolution on board fees is proposed to shareholders at the 2021 AGM.”
Excessive fees and generous allowances
“Sasol’s non-executive directors’ fees have shot up 300% over the past 10 years,” said Active Shareholder’s head analyst Mike Martin.
In addition to the fees, in financial 2021, the non-executive directors are in line to receive generous travel allowances. The allowance will vary from R86 000 to R260 400, depending on the hours travelled, and will be paid for each of the four board meetings held each year.
This allowance is over and above the cost of flights and accommodation, which is paid for by Sasol.
Martin described this as “unacceptable” in the context of Sasol’s minimum annual wage of R221 146.
While he welcomed the proposed 20% cut Martin noted that it will not affect the generous travel allowance that directors are due to get this year. It also does not appear to affect the fees for scheduled committee meetings or fees for special purpose ad hoc committee meetings.
“We have in the past raised governance issues with Sasol and their response appears to be that they will do whatever they’re legally required to do,” said Martin, referring to Sasol’s policy of only putting non-executive directors’ fees to shareholders every second year.
“Now we can see the sort of serious problems this type of approach can create.”