Coronation’s strange and secretive payouts
In the not-too-distant future we’re going to look back on the structure and value of Coronation’s remuneration policy and wonder how it was possible. To be able to ring-fence 30% of pretax profit and allocate it at will to key employees will seem a wondrous thing in probably no less than five years.
These are not small amounts. In financial 2016, the 30% was worth about R620m and in 2015, it was worth an eye-popping R720m. Certainly, Coronation’s fund management team deserves to be rewarded, richly. But when the rewards are this rich, you have to wonder if we’re not dealing with some sort of market failure.
Of course, we’ll never know just how rich individual rewards are because of the poor levels of disclosure. For the same reason, we’ll never know what performance measurements were used to make the awards.
At this year’s annual general meeting, the Coronation board told shareholders it was no one’s business but those of the executives involved. It continues to claim the trust that manages the 30% pool is independent of Coronation Fund Managers.
And, for good measure, the board says allocation details are a competitive advantage they do not want to disclose. That might be another sign we’re dealing with market failure.
Despite the lack of useful details, 84.6% of shareholders at the meeting voted in favour of the policy. This seems odd until you consider that most of the votes came from other institutional fund managers (including the Coronation trust with 20%) who are probably keen that the Coronation remuneration details are kept under wraps.
They would no doubt prefer Coronation to take itself and its remuneration policy out of the limelight by delisting.
Coronation shareholders have done well from its listing, but it recalls the saying about Liberty that if you wanted to make money on your savings or pension, put your money into Liberty shares rather than its investment products.
Plastics packaging specialist Bowler Metcalf (BowCalf) is the kind of company investors are inclined to give the benefit of the doubt.
The company is one of the most enduring small-cap stories to emerge from the late 1980s listings boom (along with Spur Corporation, Combined Motor Holdings and Nu-World), its tenure on the JSE characterised by perennial profit with regular dividends to boot.
What’s more, the company’s Spartan head office in the Ottery, Cape Town, production hub is the antithesis of corporate largesse (ask anyone who has strained to follow proceedings at the company’s annual general meeting above the persistent buzz from the factory).
But BowCalf’s latest trading statement covering the six months to December 31 will rattle the hardiest shareholders. On Tuesday, the company said earnings and headline earnings were expected at between 37c and 42c per share respectively. This is 5.5% to 16.7% lower compared with last year’s interim earnings of 44c per share and an ominous 23% to 32% lower than the corresponding interim earnings in 2016.
The market wasted no time in marking down BowCalf rather heavily on Wednesday. The share price, which was as high as R11.50 in April 2016, is now at less than R8. Any weaker and BowCalf – with a market cap of only R750m — might be subject to predatory attention.