Tongaat Hulett shareholders stunningly voted against the company’s remuneration policy at Wednesday’s annual general meeting (AGM), with 59.36% electing not to endorse it. Only 40.64% voted in favour, with 9.04% abstaining from the resolution. The resolutions on the policy and its implementation are both non-binding.
This is unprecedented and represents the first time shareholders have rejected a remuneration policy at a large JSE-listed company.
For the resolution asking shareholders to endorse its remuneration implementation report, only 59.56% voted in favour; 40.44% voted against. A total of 89% of shareholders voted at the AGM.
When asked for comment, the company’s investor relations and communications executive Michelle Jean-Louis referred Moneyweb to the “last paragraph” of the SENS announcement containing the results of the AGM: “The two non-binding advisory votes on the company’s Remuneration Policy and Implementation Report received less than 75% support from shareholders. Accordingly, Tongaat Hulett is hereby requesting shareholders who voted against the non-binding advisory votes or abstained from voting, to provide their details to the Company Secretary at Maditshaba.Mahlari@tongaat.com before 30 August 2018, in order for the Board to arrange engagement with the respective shareholders to ascertain the reasons for their votes.”
The JSE incorporated King IV into its listing requirements in 2017, and listed companies are now required to put their remuneration policies as well as implementation thereof to a shareholder vote at AGMs. If fewer than 75% of shareholders vote in favour of remuneration resolutions, companies are now required to hold (and report back on) a formal engagement with dissenting shareholders.
Tongaat had no further comment beyond the announcement it was forced to make.
The Public Investment Corporation (PIC) is the largest shareholder in Tongaat. As at March 31, 2018, it held 14.24% of the company. Two BEE vehicles (TH Infrastructure SPV and yoMoba SPV) held 10.32% and 8.26% respectively, followed by Allan Gray (6.3%) and PSG Asset Management (5.95%). Given the significant amount of dissenting votes, it is likely that most of these large holders voted against the policy.
Proxy voting results for most institutional shareholders will only be available at the end of this quarter. However, Old Mutual Equities, which holds shares in Tongaat, confirms it voted against the resolution on the remuneration policy. It says a vote against the item is “warranted” because “the remuneration policy includes a share matching element that is not performance-related, the share usage limit exceeds recommended limits, and the disclosure around the Directors’ severance provisions is limited”.
At last year’s AGM, it also voted against the resolution, saying that “actual targets applicable to LTIP [long-term incentive programme] awards are not disclosed, a small part of the variable incentive package (matching shares on DBP awards) is not subject to further performance conditions, and the share usage limit for all plans remains excessive (at 9.6% of current issued share capital)”.
Last year, Allan Gray (on behalf of clients) voted against Tongaat’s remuneration policy. The PIC voted for the resolution, but against the reappointment of Deloitte & Touche as auditors.
Tongaat’s remuneration committee (remco) comprises Brand Pretorius (remco chair), Bahle Sibisi and Nonhlanhla Mjoli-Mncube.
In its remuneration report, Tongaat says that as part of the remuneration committee’s engagement “with dissenting as well as other shareholders on matters related to disclosure, performance conditions and the structuring of remuneration packages” during 2017/18, four main themes emerged:
- Additional disclosure requested on performance conditions – financial and non-financial targets/KPIs and ranges/thresholds compared to stretch;
- More detail is required on the structure of STI (annual bonus) and its context within the total remuneration package, including the quantum of variable pay compared to fixed pay;
- Debate on the vesting scales of the Total Shareholder Return (TSR) component of the LTI, which has a 25% weighting in one of three share schemes. Debate on the length of the vesting period of LTI; and
- Questions have been raised on the CEO’s package.
On the first two items, it says cognisance was taken of this feedback and it refers to additional disclosure in the 2018 remuneration report.
On the third item, the remco says simply “This is an ongoing consideration”.
And, on the fourth item, Tongaat says “Specific contextual responses have been provided in the direct engagement process. In 2016/17 and 2017/18 the CEO elected to receive a 0% cash package increase.”
In 2018, CEO Peter Staude received total remuneration of R13.528 million, including long-term incentives as reflected of R3.421 million. In 2017, he received total remuneration of R20.039 million, including a R6.626 million cash bonus.
Staude recently announced his retirement and will step down as an executive director at the end of October.