These 14 Top 100 companies are under scrutiny for exec pay

A Moneyweb analysis of the 100 largest JSE-listed companies reveals 14 companies where more than 25% of shareholders who voted at their annual general meetings (AGMs), were not in favour of the companies’ remuneration policies. Despite being phrased as a vote on a broad policy, this is generally a vote on incentives and remuneration of executives and management.

While there is no legal requirement to allow shareholders to vote on the matter, the King III Report on Corporate Governance, in Principle 2.27, states that “Every year, the company’s remuneration policy should be tabled to shareholders for a non-binding advisory vote at the annual general meeting. This vote enables shareholders to express their views on the remuneration policies adopted and on their implementation”.

Companies registered in and listed in the UK (or the European Economic Area or NYSE/Nasdaq) have had to, since 2013, offer shareholders a binding vote to approve the remuneration policy, with an advisory vote on the implementation of this. The distinctions between these and a “non-binding advisory vote on (or approval of) remuneration” must be borne in mind. Most locally-listed companies offer the non-binding vote as per King II.

Based on an analysis of their most recent AGMs (in other words, the year to February 15 2017), those Top 100 companies who received votes of less than 75% in favour on the resolution relating to remuneration are:

TFG Limited – 52.72% in favour
Anglo American – 58.49% in favour
Telkom – 61.35% in favour
Vukile Property Fund – 61.57% in favour
Fortress Income Fund – 61.89% in favour
MTN Group – 67.81% in favour
Famous Brands – 68.48% in favour
MMI Holdings – 68.71% in favour
Woolworths Holdings – 69.92% in favour
Shoprite Holdings – 70.29% in favour
Resilient Property Income Fund – 71.04% in favour
Reunert – 72.49% in favour
Rand Merchant Investment Holdings – 74.57% in favour
Impala Platinum – 74.84% in favour

Of the three with the most votes against, two have formally noted feedback from shareholders around remuneration.

In its 2016 integrated report, TFG Limited says: “We have taken note of comments received from shareholder advisers and our investors that arose from the shareholder approval of the remuneration report for the 2015 financial year.” The Public Investment Corporation (PIC), with an 11.6673% stake in TFG, confirms it voted against the resolution, in its quarterly disclosure. It states: “The remuneration policy has inadequate disclosure around the performance criteria for both the short-term incentives (STI) and long-term incentives (LTI). There is lack of disclosure of weightings, more than one performance indicator and targets. STI has only one performance condition – Heps, which can easily be manipulated and the LTI also has one performance condition – Heps, which is also inadequate. Best practice recommends that companies must have multiple performance measures to avoid manipulation of results or poor business decisions.”

Anglo American, says it “is mindful of the concerns expressed by a large number of shareholders in relation to executive remuneration in 2015, which have led to the remuneration report (Resolution 16) not receiving the same high level of support compared to previous years. The dialogue which the Company has had with many of its major shareholders leading up to the AGM has helped clarify the issues, and this will continue in the form of further consultation over the coming months ahead of the 2017 AGM, when a revised remuneration policy will be put to the vote. Setting executive remuneration in a volatile industry such as mining can be challenging and the Remuneration Committee intends to again engage with shareholders in order to refine the policy to ensure that it is both appropriate and motivational”.

It has been under pressure for some time, directly contradicting its claims of a “high level of support”. In 2015, it received even fewer votes in favour (54.36%), while in 2014 it managed around 60%.

The PIC, which owns 10.0399% of Anglo, says its reason for voting against the implementation resolution is: “The remuneration policy appears to be inconsistent with the best practice. The Company discloses earnings per share (EPS) as the only indicator for STI plan. PIC recommends that companies should have multiple indicators to avoid manipulation of results”.

In the case of Telkom, one wonders who else – apart from government (39%) and the Public Investment Corporation (11%) – voted in favour of the company’s remuneration.

		Mkt cap (Rbn)	Date	For	Against	Abstain	Shares voted
1	AB Inbev	2 394.24	27-Apr-16	79.3	20.6	0.1	75.7
2	BAT	1 649.99	27-Apr-16	90.32	9.68
3	Naspers	924.30	26-Aug-16	78.6	18.02	3.03	89.55
4	Glencore	784.30	19-May-16	Not voted on
5	Richemont	518.71	14-Sep-16	>96
6	BHP Billiton	483.26	17-Nov-16	97.4	2.6		99.6
7	Anglo American	321.74	21-Apr-16	58.41	41.59	7.28	61.55
8	Steinhoff	296.16	31-May-16	Not voted on
9	FirstRand	292.98	29-Nov-16	97.14	2.86		80.5
10	Sasol	250.57	25-Nov-16	90.93	9.07		81.1
11	Standard Bank	238.68	26-May-16	84.48	15.52	0.11	82.84
12	Vodacom	224.65	19-Jul-16	99.2	0.8		91
13	MTN Group	218.10	25-May-16	67.81	32.18		78.51
14	Old Mutual	173.34	28-Jun-16	93.17	6.83		72.86
15	Mondi	145.79	12-May-16	94.32	5.68		76
16	Sanlam	145.15	08-Jun-16	78.41	21.59		70.46
17	South 32	143.21	24-Nov-16	76.92	23.08
18	Aspen	141.61	06-Dec-16	95.82	4.18
19	Barclays Africa Group	139.24	17-May-16	81.68	18.32		91.7
20	Remgro	121.53	01-Dec-16	Not voted on
21	Nedbank	120.97	05-May-16	94.12	5.88		82.99
22	Shoprite	100.63	31-Oct-16	70.29	29.71		84.29
23	Mediclinic	100.18	20-Jul-16	85.02	14.98		84.46
24	RMB Holdings	93.92	24-Nov-16	88.80	11.2		76.62
25	Investec	92.67	04-Aug-16	80.27	19.73		76
26	Anglo American Platinum	91.51	08-Apr-16	96.31	3.68		93.79
27	Capitec	82.43	27-May-16	99.42	0.58		78.94
28	Tiger Brands	81.15	16-Feb-16	89.21	10.79		100
29	Bid Corp	79.48	11-Nov-16	98.90	1.1		100
				96.10	3.9		100
				71.60	28.4		100
30	Discovery	77.33	29-Nov-16	86.06	13.94		78.28
31	Woolworths	76.29	30-Nov-16	69.92	30.08		67.79
32	Growthpoint	75.28	15-Nov-16	79.90	20.1		71.7
33	Hammerson	73.31	25-Apr-16	Not voted on
34	Anglogold Ashanti	71.53	04-May-16	87.17	12.83		78.71
35	Kumba Iron Ore	67.43	13-May-16	92.18	7.82		91.82
36	Redefine	62.97	09-Feb-17	76.68	23.32		78
37	Intu	60.45	04-May-16	Not voted on
38	RMI	59.75	24-Nov-16	74.57	25.43		76.46
39	Fortress	58.65	01-Nov-16	61.89	38.11		64.26
40	PSG Group	57.12	24-Jun-16	Not voted on
41	Bidvest	55.54	28-Nov-16	99.10	0.9		100
				95.26	4.74		100
				67.99	32.01		100
42	Reinet	55.12	30-Aug-16	Not voted on
43	Resilient	49.42	31-Oct-16	71.04	28.96		78.5
44	New Europe Property	48.92	12-May-16	Not voted on
45	Netcare	47.26	03-Feb-17	90.06	9.94		72.75
46	Sappi	46.06	08-Feb-17	94.71	5.29		82.89
47	Mr Price	42.49	31-Aug-16	84.66	15.21
48	Capital & Counties	40.66	06-May-16	97.94	2.06		76.61
49	Brait	40.65	20-Jul-16	Not voted on
50	Pioneer Foods	39.99	10-Feb-17	85.33	14.67		68.59
51	MMI Holdings	39.87	22-Nov-16	68.71	31.29		81.4
52	Assore	39.79	25-Nov-16	93.82	6.18		90.3
53	Impala Platinum	38.86	26-Oct-16	74.84	25.16		72.43
54	Telkom	37.62	26-Aug-16	61.35	38.63		81.28
55	Gold Fields	37.58	18-May-16	85.07	14.92	1.3	100
56	Life Healthcare	36.71	25-Jan-17	97.99	2.01		77.1
57	TFG Limited	36.17	06-Sep-16	52.72	47.28		77
58	Truworths	36.03	03-Nov-16	79.05	20.95		76.1
59	Imperial	35.89	01-Nov-16	98.88	1.12		72
60	Spar	33.89	07-Feb-17	94.49	5.51		72.85
61	Exxaro	33.82	26-May-16	90.80	9.2		79
62	Pick n Pay	33.70	25-Jul-16	84.58	15.42		88.78
63	AVI	33.12	03-Nov-16	97.28	2.72		78.49
64	Liberty Holdings	32.91	20-May-16	99.00	1		88.16
65	Distell	32.46	20-Oct-16	97.56	2.44		90.19
66	Rockcastle	32.25	25-Nov-16	Not voted on
67	Clicks Group	30.43	26-Jan-17	98.26	1.74		83.64
68	Hyprop	30.01	01-Dec-16	89.91	10.09		66.47
69	Tsogo Sun	28.86	19-Oct-16	85.40	14.6		77.03
70	Massmart	28.86	26-May-16	84.72	15.28		89.25
71	Santam	27.75	01-Jun-16	87.10	12.9		100
72	Sibanye	27.61	24-May-16	88.45	11.54	1.01	82.4
73	Northam	26.03	02-Dec-16	90.03	9.97	4.38	76.83
74	Barloworld	24.93	08-Feb-17	80.62	19.38		72.9
75	African Rainbow Minerals	24.82	09-Nov-16	87.50	12.5		95.1
76	KAP	23.69	30-Nov-16	92.38	7.62		88.11
77	Coronation	23.26	14-Feb-17	84.59	15.41		79.6
78	EOH	21.17	19-Feb-16	Not voted on
79	Dis-Chem	21.10	No AGM since listing in late 2016
80	Curro	19.95	24-Jun-16	Not voted on
81	Tongaat	17.97	27-Jul-16	86.58	13.42		90.81
82	Oakbay Resources	16.40	30-Sep-16	100	0		100
83	Harmony	15.98	25-Nov-16	91.03	8.97		87.06
84	Oceana	15.72	16-Feb-17	90.1	9.9		94.1
85	Arcelor Mittal	15.65	25-May-16	98.37	1.63		85.64
86	Famous Brands	14.68	29-Jul-16	68.48	31.51		71.95
87	RCL Foods	14.08	08-Nov-16	91.55	8.45		96.55
88	SA Corporate Real Estate	13.90	20-May-16	90.98	9.02		79.11
89	Italtile	13.90	25-Nov-16	95.26	4.74		83
90	JSE Limited	13.90	26-May-16	99.51	0.49		67.42
91	Attacq	13.82	24-Nov-16	89.51	10.49		64
92	Vukile	13.41	29-Aug-16	61.57	38.43		69.81
93	Reunert	13.38	13-Feb-17	72.49	27.51		87.13
94	Globe Trade Cente	13.21	24-May-16	Not voted on
95	Super Group	13.14	22-Nov-16	95.09	4.91		79.19
96	Zeder	12.74	24-Jun-16	Not voted on
97	AECI	12.67	30-May-16	79.83	20.17		81.58
98	HCI	12.59	01-Nov-16	86.11	13.89		90
99	Blue Label Telecoms	12.36	08-Dec-16	97.73	2.24	0.03	88
100	Nampak	12.31	01-Feb-17	97.45	2.55		83.08

Of course, the more tightly-held/less-liquid the stock is, the more likely you are to find 99%-plus endorsements. In one – not surprising – instance, 100% of the 100% present shareholders voted in favour of the company’s remuneration policy.

It must also be noted that even if a relatively large percentage of shareholders vote in favour of a company’s remuneration policy (binding or otherwise), this percentage is almost always lower than votes on other resolutions. In other words, an 85% ‘approval’ of a remuneration policy will in all likelihood be far lower than the 90%-95% of votes cast in favour on other matters, such as re-election of directors or, even, the authority to repurchase shares.

In some cases, abstentions on the remuneration-specific resolution(s) are disclosed (and these are either included in the vote split or excluded).

The other vector here is how many shares were actually voted at the AGM. In some cases (like Anglo), this is surprisingly low (61.55%).

Two companies (unbundled during 2016) stand out in this analysis: Bidvest and Bid Corporation (Bidcorp). Both offer three (non-binding) votes on remuneration: an endorsement on the company’s policy on base package and benefits, its policy on short-term incentives, and its policy on long-term incentives

This means shareholders can vote far more granularly on these matters. Based on the past two AGMs, shareholders are far less satisfied (±65% approval) with the company’s long-term incentives than issues of base pay and short-term incentives.

* Hilton Tarrant works at immedia. He can still be contacted at hilton@moneyweb.co.za.

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It is high time SA follow the overseas ‘binding shareholders ‘approval vote with regard to company remuneration as prescribed in King 3.Local companies should adopt King 3.It sounds suspiciously convenient that SA companies rely upon King 2.
Shareholders are the lifeblood of any company and management must be accountable to shareholders also with regard to remuneration of the board.It would seen that King 2 is conveniently albeit questionably followed by corporate SA.