Sex Pistols in the boardroom
Punk bands and today’s high-flying corporates have more in common than you might think
In the punk era of the late 1970s the only bands believed to have any chance of success were those that looked awful and sounded worse. The 21st-century investment equivalent of the successful punk band is the hi-tech behemoth that swallows up huge amounts of cash and may or may not make a profit.
Amazon’s seeming refusal to demand profits from eye-watering levels of investment did nothing to temper investor sentiment. To the delight of its dividend-deprived shareholders it used its stratospheric rating to secure funding to develop new business opportunities.
Twitter made its first quarterly profit in the company’s 12-year history in December last year and is expecting to make its first-ever fullyear profit this year. The lack of profit hasn’t dented investor enthusiasm for the shares, which were listed six years ago. Over at Tesla, Elon Musk seems to have a particular disregard for profits.
You might think this presents a challenge to remuneration committees; if companies aren’t making profits, on what basis can the executives be rewarded? The just-released Naspers remuneration report demonstrates just how comically old-fashioned that attitude is.
The best paid of Naspers’s very well-paid executives are employed by the group’s e-commerce business, which if Tencent is stripped out, can boast, Tesla-style, of never making a profit. Stripping out Tencent in this context certainly makes sense as no executive at Naspers has input into Tencent management
Thanks to share options and share appreciation rights allocated to him in 2014, when he was appointed CEO, Bob van Dijk picked up R1.6bn in 2018. The size of this award was down to the dramatic increase in the Naspers share price over that time.
No CEO of a bricks-and-mortar business in SA has been rewarded as much in one year as Van Dijk has received in each of the past three years. Sabmiller’s Alan Clark came close in 2016, but only because he happened to be running the company at the time of the AB Inbev takeover and was able to cash in years of share options in one go.
Not even the ridiculously generous banks pay their executives as well as Naspers.
Little wonder that institutional shareholders revolted at the 2017 annual general meeting. Ahead of that meeting Swiss-based investment adviser Albert Saporta described the group’s remuneration policy as “intellectually dishonest” in an open letter to the board.
Saporta was particularly agitated because the value of the Tencent stake relative to Naspers’s market capitalisation had grown from 90% to 130% since Van Dijk took the helm. Saporta did not respond to a request for comment on the latest report.
Tensions between the board and the institutional shareholders escalated when the unlisted
Naspers
high-voting A shares were used in what was deemed an effort to camouflage the extent of opposition. The official voting tally showed only 22% opposition to the remuneration policy; strip out the high-voting, tightly held A shares (1,000 times the listed N shares) and the picture is starkly different. About 70% of the N shareholders voted against the policy.
Group chair Koos Bekker was evidently stunned by the shareholder anger.
Bekker may have expected shareholders to be grateful for the several-thousandfold increase in value of their investment as a result of his 2001 decision to buy a stake in an unknown Chinese internet company.
The shareholders, grateful or not, evidently didn’t think it justified poor remuneration policies or free-loading executives.
When the dust settled Naspers got down to the business of engaging with its shareholders. The result is a substantially improved remuneration report in terms of disclosure, but the outcomes are unchanged.
Craig Enenstein, the new chair of the remuneration committee, sets the ground for the open-ended nature of the remuneration bill in his “Dear Shareholder” letter.
“Our people are at the heart of our success,” says the new remuneration chair, presumably not alluding to the lowly paid journos in the