An unclear commitment to addressing the risks presented by climate change could be just one of shareholders’ concerns that will have to be addressed by the Standard Bank Group (SBG) board at its annual general meeting on Friday.
While the bank’s policy on climate change is likely to be the focus of much of the meeting’s discussion, a number of activist shareholders are expected to raise other governance-related issues.
NGO shareholder activist Just Share has led the charge with a call to shareholders of the biggest bank in South Africa to vote against the re-election of five “climate-conflicted” directors.
It says the five directors – Trix Kennealy, Nomgando Matyumza, Priscillah Mabelane, Nonkululeko Nyembezi and Jacko Maree – are among the seven on the SBG board with close ties to the fossil fuel industry.
The worry is that with almost 40% of board members linked to that industry, discussion around climate change might not be as vigorous as it should be given the material and urgent risk it poses not only to the environment but to the bank’s business. It could encourage the toleration of an unacceptably high loan exposure to an industry that some say will be littered with value-less ‘stranded assets’ within years.
Although not focused on climate change, Active Shareholder, which advises NGOs on how to vote at AGMs, also has concerns about a number of the directors.
In his proxy voting advisory report, Mike Martin of Active Shareholder describes a board profile that reflects a lack of long-term planning by the nominations committee.
Only five of the 18 directors have served for more than six years; two have served between six and nine years, and three have served more than nine years. Of those three, chair Thulani Gcabashe has served for 16 years, Myles Ruck for 17 years and deputy chair Jacko Maree for almost 20 years.
Remarkably, despite their long tenures – well-passed the nine-year flag – the banking group describes Gcabashe and Ruck as independent directors.
Martin acknowledges that the Reserve Bank grants banks an exemption from the requirement to classify directors who have served more than nine years as ‘not independent’ but says he’s disappointed that SBG, which in previous years boasted that its governance “extends beyond compliance”, availed of the exemption.
“We have concerns with the independence of the board particularly in light of the long service of the chairman and the fact that the deputy chairman is not independent,” says Martin.
He adds that an additional concern is that three directors – Kennealy, Matyumza and Mabelane – are associated with another company, Sasol.
Martin worries that the overlap could have an unintended impact on attitudes to different issues.
In this regard he notes Sasol did not put the appointment of auditors to a shareholder vote until last year when it was obliged to by changes to the JSE’s listing requirements. Currently Standard Bank doesn’t put the election of its audit committee members to a shareholder vote. The Companies Act requires this but again the Banks Act provides an exemption. Not all banks, Absa and Nedbank for instance, bother to take advantage of this exemption.
This rather hardline attitude is one of the reasons Martin is recommending voting against Kennealy, who is chair of the SBG audit committee. He is also opposing her re-election because she is on the Sasol audit committee. In addition he’s opposing the re-election of Matyumza, who is also a member of both the SBG audit committee and the Sasol audit committee.
Lawful doesn’t mean acceptable
Martin hastens to add that SBG is doing nothing it is not entitled to do but says that it seems intent on only doing what it is required to do. “It’s about attitudes and perceptions,” says Martin.
For activist shareholder Chris Logan of Opportune Investments, the worry is that ongoing generous remuneration is not aligned with the interests of shareholders.
“Each year the top executives each gets paid tens of millions of rands but right now the share price is at the same level it was 13 years ago,” says Logan who believes the well-paid management must devise a considerably new way of doing business; a way that will better align the interests of executives and shareholders.