Steinhoff board intact after AGM pummelling
• Shareholders vote to retain directors • Investors hammer Deloitte over failure to detect alleged fraud
Steinhoff’s board survived a bruising annual meeting in Amsterdam on Friday though a protest vote against two directors by the Public Investment Corporation (PIC) nearly torpedoed its plan to put a “restructuring plan” to lenders in May.
The meeting, the first since revelations of widespread fraud in December caused the share price to plunge 94%, was seen as a pivotal test of whether the board still had the confidence of investors. It came after chairwoman Heather Sonn held weeks of meetings with the company’s largest investors to maintain their support.
Yet the vote for some resolutions was still close — far closer than at most AGMs.
Steve Booysen, the former CEO of Absa who is now chairman of Steinhoff’s audit and risk committee, received only 56% approval, while Angela KrugerSteinhoff, daughter of founder Bruno Steinhoff, got only 59.3%. Sonn herself saw 19.9% of investors vote against her.
It is understood that the PIC, which owns 8.4% of Steinhoff, supported Sonn, but voted against Booysen and Kruger-Steinhoff.
After the meeting, a relieved Booysen said: “Being re-elected, I can achieve my objectives to first get audited financial statements out, see the forensic probe by PwC to its completion and provide leadership so Steinhoff can recover.”
The meeting, which lasted more than three-and-a-half hours, saw a volley of questions about why the board did not know about the fraud allegedly perpetrated by former CEO Markus Jooste and also how advanced the forensic probe by PwC was.
Lungani Sibiya of the Eskom Pension and Provident Fund raised concern about the independence of the board, especially since Booysen and KrugerSteinhoff had been on the board longer than most governance codes stipulated.
Sonn replied that Booysen and Kruger-Steinhoff had been invaluable in keeping the company going.
“Our work is not done. We have to get the PwC process done, we have to get through the process with Deloitte. The intention … is to have a combination of continuity and fresh insights,” she said.
A number of former Steinhoff directors arrived at the meeting, including Len Konar, Jayendra Naidoo and Claus Daun, ostensibly to “support the new board”.
But it soon became clear the issue of shareholder value was secondary to the main concern: ensuring Steinhoff survives.
The fragility of the business became starkly evident, as Sonn and CEO Danie van der Merwe explained how many banks and credit insurers had abandoned the company, while customers had not been willing to even put
down deposits for goods ordered weeks in advance.
Steinhoff’s legal counsel, Louis du Preez, spoke of how there had been an “informal standstill” with creditors, which highlighted the delicate position of the group’s finances.
“There are a number of technical breaches in terms of governance agreements with lenders,” he said.
“We want to ensure they don’t result in payment defaults. To this end we’ve agreed an informal standstill — no formal agreement has been signed.”
Steinhoff is set to present a restructuring plan to lenders in May. Creditors include suppliers to 12,000 outlets.
But perhaps the most significant protest vote took place against auditor Deloitte. Bettina Elles, a lawyer representing an unnamed German shareholder, said voting to re-elect Deloitte would be “mind boggling” since the firm had signed off every significant report from Steinhoff for the last 20 years.
“Any of the so-called fraudulent transactions now in question would fall squarely into the realm of responsibility of Deloitte,” Elles said. “Deloitte only remains involved to protect itself from lawsuits by the companies and shareholders.”
In the end, 27% of shareholders voted against re-electing Deloitte.
At the AGM, Deloitte partner Johan Hopmans took the unusual step of reading out a statement to defend the auditor, saying “it was on our request that the investigation is being conducted by PwC”.
But Dutch investor group VEB said it was remarkable that there had not been “adequate systems to detect fraud”.
If investors were hoping for new information about what PwC had uncovered so far, they would have been disappointed.
Sonn did confirm the PwC probe had found “a pattern of transactions undertaken over a number of years across a variety of assets classes that led to the material overstatement of income and asset values”.
Several company insiders have told Business Day they were “shocked” by how widespread fraud was.
The Steinhoff board may have been relieved when it was all over, but few of the shareholders seemed satisfied with the afternoon’s proceedings.
David Maynier, the DA’s shadow finance minister, attended in Cape Town. He said he expected “aggressive Tyrannosaurus Rex-like local shareholders to tear into Steinhoff’s directors”. Instead, he said, “herbivorous Brontosaurus-like local shareholders indulged Steinhoff’s directors — they had no real appetite for a fight, which was deeply disappointing”.