MMI off the hook over liberal remuneration
Fortunately for the wellpaid members of the MMI executive team nothing hangs on the outcome of the remuneration vote at the annual general meeting (AGM). Nothing, apart from the obligation on the board to engage with dissenting shareholders if the “no” vote is more than 25%.
But even if 51% or more of the shareholders voted against the remuneration policy, there would be no obligation to make any change. They could vote against the re-election of the members of the remuneration committee, but that would require a little more determination than the average South African investor seems to possess. In MMI’s case, the executives have the additional shelter provided by two major shareholders, RMI and Kagiso/Tiso.
The shareholders who did bother to engage after 2016’s AGM, at which an estimated 50% plus of the “outside” shareholders (excluding RMI and Kagiso/Tiso) opposed the remuneration policy, may have been a little disappointed by the remuneration committee’s (remco’s) response to their concerns.
Essentially, the committee ignored their key concerns. In response to concerns about large payments to exiting executive directors, Preston Speckman was awarded a R10.5m restraint of trade. Hourly fees on an ad hoc basis will continue for nonexecutive directors despite concerns. Questions around the independence of the remco chairman were resolved by former RMI CEO Peter Cooper, just holding on to the chairmanship for a fourth year, which means he has passed the three-year cooling-off period and can now be regarded as independent.
In response to concerns about the use of retention shares, the committee decided they would be used only in specific circumstances. Amazingly, it then went ahead and awarded the executive management team one-year retention payments, but did not disclose the details. Hardly value for money from one of the smaller listed financial companies.
Naspers has recorded marginal gains since its AGM on August 25, consolidating around R3,000 in exdividend trade this week. Could it be heading for the R4,600 target set by JPMorgan?
Investors did not seem that perturbed by chairman Koos Bekker’s admonishment that some of them were “economically illiterate” and clueless about Naspers’s strategy. Or that they were disrespectful in asking questions about CEO Bob van Dijk’s hefty remuneration package for delivering losses.
Criticism that Naspers is unduly dependent on its Chinese Tencent investment seems to have been shrugged off. But the basic problem remains.
Naspers’s 33% stake in Tencent is set to remain the main driver of earnings, increasing the huge discount between Naspers’s real market capitalisation and what it amounts to when computed to its Tencent stake.
Shareholder criticism of this huge gap and the apparent lower value of the other investments hasn’t affected Naspers’s strategy, with Bekker set to remain glued to Tencent while “hoping” that other interests, notably e-commerce, will increase in value over time.
The foray into e-commerce has not been paying off. The losses keep increasing.
Unless these issues are dealt with more aggressively, Naspers could remain a risky investment. The clamouring by shareholders for change will not go away. Coming clean on the group’s murky control structure would be a logical first step.