While 14 of the Top 100 JSE-listed companies are under fire from shareholders with more than 25% of them voting against remuneration resolutions at annual general meetings (AGMs), a further 12 unbelievably don’t offer a vote (binding or not) at all! Of these 12, five are locally registered, while the remainder are registered elsewhere with (mostly) secondary listings on the JSE.
The five locally-registered companies with primary listings which don’t offer a vote (in order of market capitalisation):
- PSG Group
- Curro Holdings
- Zeder Investments
Of these, three are PSG-related companies. Of the other two listed entities related to PSG, Capitec and PSG Konsult, only the former offers a vote on remuneration. PSG Konsult – excluded from this analysis as it is outside the Top 100 – maintains in its ‘Application of King III Principles’ document that principle 2.27 requiring a shareholder vote on remuneration is “applied”. PSG Konsult states that “Director remuneration is approved at the AGM each year”. This statement may be true but that does not mean that 2.27 is applied. The only resolution related to remuneration that is voted on is an approval of non-executive director remuneration (special resolution 1 in 2016).
It is worth repeating that the King III Report on Corporate Governance (which locally-registered and listed companies need to report progress on annually), states in Principle 2.27: “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.”
The other Top 100 companies which do not offer a vote on remuneration (in order of market cap):
- Steinhoff International Holdings (registered in The Netherlands as of December 2015)
- Reinet (registered in Luxembourg)
- New Europe Property Investments (registered in the Isle of Man)
- Brait (registered in Malta)
- Rockcastle Global Real Estate (registered in Mauritius)
- Globe Trade Centre (registered in Poland)
But, when Steinhoff was registered (and had its primary listing) in South Africa, shareholders did vote on remuneration. This was in December 2014. It won’t be voted on in March 2017; only approval for remuneration of the supervisory board will be sought.
NEPI, despite not being registered in South Africa, states that “The Board recognises the importance of sound corporate governance and endorses and monitors compliance with the Quoted Companies Alliance Corporate Governance Guidelines for Smaller Quoted Companies and the King III Report on Corporate Governance in South Africa”. It also says that “shareholders have approved the company’s remuneration policy”. However, this was not voted on in 2014, 2015 or 2016.
Locally-registered and -listed
Remgro admits it does “not apply” principle 2.27 of King III. It states in its report on application of King III: “Remgro’s remuneration policy is set out in the Remuneration Report. It was decided by the Board not to ask shareholders for their non-binding approval of the remuneration policy. The rationale and basis of the Group’s executive remuneration policy is carefully considered by the Remuneration and Nomination Committee and is fully disclosed in the integrated annual report.”
PSG Group describes principle 2.27 as “partially applied”. It says: “After careful consideration, the board is of the view that its remuneration committee, consisting of four non-executive directors of which three are independent, are best placed having specific industry knowledge to determine and approve the company’s remuneration policy. This will be monitored continuously and, to the extent that circumstances change, the board will reconsider the application of this principle.”
In EOH’s most recent update on the application of King III, dated December 2016, it states that principle 2.27 is “applied partially” (“remuneration payable to non-executive directors is approved by shareholders”). Curiously, in its previous update (2015), it stated the principle is “applied”. However, a shareholder vote on EOH’s overall remuneration policy (binding or otherwise) has not been tabled at either the 2015 or 2016 or 2017 AGMs. In 2015, there were votes on increases in the remuneration of directors, in 2016, there was a vote on remuneration of non-executive directors and in 2017, there was a similar vote on non-exececutive remuneration.
Curro, in its King III report, admits that principle 2.27 is “not applied”. It states that “The remuneration policy is not put to shareholders for a non-binding advisory vote annually” and argues that the “Board is best placed to determine and approve the Company’s remuneration policy. In accordance with the JSE Ltd Listings Requirements and the Company’s Memorandum of Incorporation, which was approved by shareholders, the non-executive directors’ remuneration is submitted to shareholders for approval and the executive directors’, prescribed officers and the company secretary’s remuneration is reviewed and approved by the Remuneration Committee as mandated by the Board. The Board is of the view that executive directors are remunerated fairly and reasonably. Executive Management is best placed to determine and approve employees’ remuneration. However the share options (long-term incentive scheme) awards are reviewed and approved by the Remuneration Committee as mandated the Board.”
Zeder says of principle 2.27 that there is “full application”. It argues that the “company’s remuneration policy is approved by PSG Group as part of the management agreement between Zeder and PSG, in light thereof that PSG carries the cost of remunerating Zeder’s directors”. However, the management agreement has been “internalised” as of September 1 2016. This means that at its next AGM, Zeder should put this vote to shareholders.
The country’s largest investor, the Public Investment Corporation (PIC), tries to use its votes on resolutions to influence these companies to put remuneration to a shareholder vote.
In the case of EOH, when in February 2016 it owned 11.4% of the company, it voted against resolution one, which was to appoint four directors as members of the Audit Committee. In its reasoning, it discloses that “The PIC questions the collective skills of the members of the audit committee in relation to the company’s industry. Furthermore, the Company failed to table to shareholders the non-binding advisory vote at the annual general meeting”.
For Zeder, the PIC seems to think it voted against a non-binding advisory vote on remuneration policy as it was “inconsistent with best practice” despite this never to have been tabled at the AGM. Coronation voted against resolution 10 (authority to issue shares), while Allan Gray, on behalf of clients, abstained on resolution 4 (director re-/appointment), and voted against resolutions 3 (director re-/appointment) and 10 (authority to issue shares).
With PSG Group (at which time it owned 4.4%), it voted against the remuneration of non-executive directors, which it described as “excessive”. It voted for all the resolutions tabled at the Curro AGM. It has not yet disclosed how it voted at the Remgro AGM in December 2016.
Of those not registered in South Africa, the PIC voted for all the resolutions tabled at the following AGMs (at which time it owned shares): Reinet (9.65%), Brait (8.16%) and New Europe Property Investments (8.96%). In the case of NEPI, despite voting in favour of all resolutions, it noted that the “remuneration policy appears to be inconsistent with best practice. Although there is some disclosure for performance targets, it is our view that there is a need to be transparent in terms of peer group companies’ disclosure and strategic objectives being more specific”.
Beyond the votes at the Zeder AGM, there were no notable ‘against’ votes or abstentions by either Coronation or Allan Gray related to the other companies referenced above (some of which they did not hold on behalf of clients).
* Hilton Tarrant works at immedia. He can still be contacted at email@example.com.
* He holds shares in Steinhoff International, first acquired in September 2010, and in EOH, first acquired in March 2011.