Tongaat’s pay policy rejected

Shareholders accuse agribusiness of not aligning their interests with those of the group’s executives

Bitter shareholders in Tongaat-Hulett overwhelmingly voted against the group’s remuneration policy at an annual general meeting on Wednesday. At the meeting, at which 89% of Tongaat’s shareholders were represented, the resolution on remuneration received support totalling just 40.64%.

Bitter shareholders in TongaatHulett overwhelmingly voted against the group’s remuneration policy at an annual general meeting on Wednesday.

At the meeting, at which 89% of Tongaat’s shareholders were represented, the resolution on remuneration received support totalling just 40.64%.

While the vote is nonbinding, such a level of “majority” resistance is not commonplace among listed counters, where a 75% majority is required to pass the resolution.

The vote also means the group will need to further engage the dissenting shareholders at another meeting around the remuneration policy.

The failed vote came two days after the agribusiness company announced that CEO Peter Staude, who has recently been under fire from some shareholders for Tongaat’s long-term underperformance, would retire in October. The firm had also said that CFO Murray Munro would step down with immediate effect due to health reasons.

The annual general meeting heard barbed criticism of Tongaat’s poor long-term performance, specifically the returns generated by its core sugar division. The remuneration of senior executives was also critically discussed.

Opportune Investments CEO Chris Logan said Tongaat showed extraordinary nonalignment of the interests of shareholders and executives. A worksheet provided by Logan showed Staude’s total remuneration for the past 10 years was about R100m, while Munro received around R63m.

Tongaat’s share price has lost about 25% over the past five years, with a poor profit performance in the past financial year prompting a halving of the dividend payout.

Borrowings have bloated from about R5.4bn in 2014 to over R9bn.

David Holland, cofounder of Fractal Value Advisors, argued that the wealth destruction at Tongaat was not a recent development. “The JSE is up around 1,000% over 20 years, while Tongaat is up only 135%. Only for three years out of 20 years has Tongaat beat its cost of capital,” he said.

Tongaat chairman Bahle Sibisi reassured shareholders there was a commitment to aligning the interests of shareholders and executives. “The remuneration committee will spend time looking at ways to align these interests,” he said.

Logan pointed out that since 2010 capital expenditure in the sugar division topped R9.5bn, which was close to the group’s market capitalisation.

He asked whether Tongaat had undertaken a diagnostic report to address and improve shareholder returns and the group’s financial position.

Staude said Logan’s assessment was made with the benefit of hindsight.

“When we look through the front window, we don’t have a clear picture of what is going to happen [in the sugar market]. We do the best we can,” he said.