Executive pay under scrutiny

Old Mutual Investment Group is not satisfied with Tongaat Hulett’s executive pay structure and says it plans to discuss the issue with the company.

Old Mutual Investment Group is not satisfied with Tongaat Hulett’s executive pay structure and says it plans to discuss the issue with the company.

This comes after Investec Securities said in a report that it wanted Tongaat CEO Peter Staude to step down after the sugar producer’s “appalling” annual results and underperformance over the past decade.

“We welcome the fact that brokerage houses are taking an active interest in these kind of governance-related issues,” said Jon Duncan, head of responsible investment at Old Mutual Investment Group.

“As an asset manager, our preferred approach is to raise concerns directly with management teams as a basis for productive engagement,” he said.

Old Mutual was concerned about the way Tongaat’s executive remuneration was structured and voted against the pay policy at the annual general meeting in August 2017.

“We will be engaging management on this issue in order to seek greater alignment between company strategy and reward structure,” Duncan said.

Tongaat’s shares have fallen to their lowest levels since 2009 after the company reported a 37.2% decline in headline earnings for the year to March.

After announcing the weak result, the group said on Wednesday last week it had awarded Staude and chief financial officer Murray Munro shares bought on the market as part of Tongaat’s long-term incentive plan.

Staude received R1m worth of shares and Munro R458,407 worth — both before tax deductions. Investec said in its report that management’s guidance that investors could expect a decent result for the year ended March was “inaccurate”.

“Apart from the interim guidance … the most frustrating aspect of the 2018 financial results is the painfully slow pace of unlocking value from Tongaat’s land portfolio,” it said.