Former Telkom group CEO Sipho Maseko was paid a R10 million cash “retention bonus” in the 2022 financial year, despite having resigned in July. He originally intended to step down on 30 June this year, but in December the group announced he would bring forward his exit to the end of the 2021 calendar year.
He was paid this retention bonus in two equal tranches, on 1 April 2021 and 30 March 2022. This was the “outstanding balance” of the R20 million retention payment finalised by the remuneration committee in the prior financial year.
Remarkably, Telkom also did not have a restraint of trade agreement in place with Maseko in his original employment contract. It says “in order to mitigate potential risk to Telkom of the [group CEO] joining any competitor of the group and to protect both shareholders and the group’s interest, the board concluded a restraint agreement with Maseko after the termination date of 30 June 2022 for a restraint period of 12 months”. For this, it paid Maseko R32 million on 1 July.
Going forward, it says “all newly-appointed executive directors and group prescribed officers will have six calendar months’ notice in their employment contracts” and a “six-month restraint agreement effected upon termination date”. The new group CEO Serame Taukobong, CEO of Telkom Consumer, Lunga Siyo, and CEO of BCX Jonas Bogoshi all received shares last year under the group’s forfeitable share plan on the basis that a six-month restraint of trade will be added to their contracts.
The R20 million retention payment to Maseko drew the ire of shareholders, with the group’s largest institutional shareholder the Public Investment Corporation (PIC) voting against both non-binding remuneration resolutions at the 2021 AGM. The resolution on how it implemented its remuneration policy received votes in favour of just 65%. After engagement with shareholders, one of the three concerns raised was the retention payment to the outgoing GCEO”.
It says that “while shareholders acknowledged that retaining the GCEO is a key objective, they were concerned about the total value of the award (R10 million paid in FY2021 and R10 million paid in FY2022). Shareholders were also concerned about the lack of rationale for such a large sum being paid to the group CEO. In addition, they were concerned that Telkom did not deliver the retention payment as equity and is additional to other variable pay he is eligible to receive.”
The remuneration committee’s (remco’s) response is that “The board considered it to be strategically important to retain Maseko’s services for a minimum period of two years. The decision at the time was supported and approved based on the following key reasons:
• The timing of the value unlock strategy, including the restructuring that was underway to facilitate this, together with the significant shifts taking place in the telecommunications space;
• The implementation status of key strategic matters, such as the spectrum auction and optimisation of the business units; and
• The competitive environment within which Telkom found itself, with its largest competitors in flux with their leadership.”
Telkom says “the following conditions were linked to the retention payment:
• Maseko must remain in Telkom’s employment until 31 March 2022. If he resigns during the retention period, he will be expected to repay the gross amount received, which includes the tax portion, up to the exit date/termination date of the agreement;
• The notice period of three months will be enforceable if he resigns or if his service is terminated by Telkom for any reason other than those outlined in the agreement; and that
• A malus and clawback clause was included.”
It reiterates that “the board remains of the opinion that the right decision was taken to retain Maseko’s service for two years. He remains in an advisory capacity from 1 January 2022 until 30 June 2022 to assist with completing selected strategic matters.”
Because he remains in an advisory capacity, he technically remains in the employ of Telkom.
The remco’s response does not address the shareholder concern about the retention payment being in cash, not equity.