Give direc­tors a bench­mark

Finweek English Edition - - Letters - (DR) PHILIP LLOYD

CON­GRAT­U­LA­TIONS ON a re­ally good sum­mary of com­pany per­for­mance – I read it cover to cover ( The Top 200, 2007). Your list­ing of direc­tors’ re­mu­ner­a­tion par­tic­u­larly amused me. The fact that you gave no com­ment on that ta­ble was al­most com­ment in it­self.

For ex­am­ple, I’ve long griped at the way Sappi’s direc­tors have en­riched them­selves at the ex­pense of its share­hold­ers and I re­cently gave up my shares in dis­gust at their aw­ful per­for­mance. To see that the direc­tors made off with 40% of the prof­its was a clear sig­nal that they’d gone from merely mad to plain bad.

Of course, if the direc­tors owned a large part of the com­pany they’d be jus­ti­fied in tak­ing a large part of the prof­its. How­ever, in gen­eral that’s not the case. The Sappi direc­tors don’t own enough of the com­pany to fea­ture in your list­ing.

Fur­ther down the list was that dot.com dis­as­ter Di­men­sion Data. The hur­rahs for the maiden div­i­dend, for those coura­geous enough to have seen their R70/share in­vest­ment col- lapse to R2/share and then re­cover to R7/share, might have been a bit more muted had they re­alised that the direc­tors had made off with 25% of the money that should, by rights, have been theirs. Di­data’s direc­tors also don’t own enough to fea­ture in the lists. Then you come to those mighty black em­pow­er­ment en­ter­prises. For ex­am­ple, Sekunjalo strug­gles along gen­er­at­ing less than 14% on its as­sets and cur­rently has a neg­a­tive quick ra­tio, yet the direc­tors took 160% of the prof­its for them­selves. They do own 16% of the com­pany but they seem to value that above other share­hold­ers.

Gi­jima man­ages an 8% re­turn on to­tal as­sets but cur­rently has a pos­i­tive quick ra­tio. Its direc­tors took a more mod­est 40% of the prof­its, which is very rea­son­able when you con­sider they own nearly 40% of the com­pany. Mvela Re­sources has done well in the re­cent re­sources boom, but you have to ask if the direc­tors should have taken nearly 60% of the profit when they own 7% of the com­pany.

Th­ese fig­ures have to be con­trasted with what the big boys earn. BHP Bil­li­ton man­ages to pay its direc­tors only 0,31% of its prof­its, An­glo Amer­i­can 0,18%, San­lam 0,23% and Ned­bank 0,64%.

Per­haps it’s time for those much vaunted “re­mu­ner­a­tion com­mit­tees” to re­ceive a per­sonal copy of your list­ing. It would give them a bench­mark they ob­vi­ously lack.

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