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These 14 Top 100 companies are under scrutiny for exec pay

Despite votes on remuneration being non-binding, shareholders are starting to find their voices.

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.

End of comments.

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