What does September really earn?
Shares delivered to inflate the Telkom CE’s total package to R27m
AFTER TWO YEARS at the helm of Telkom, CE Reuben September has been rewarded with free shares worth R8,1m in terms of a restraint of trade agreement he entered into with South Africa’s telecommunications giant. September has taken delivery of 58 369 shares issued at an average R139/ share at the time of the grant (but now worth R113/share). He’s been at the helm of Telkom since April 2007, first as acting CE before being appointed full time in November of the same year.
The R8,1m September received in Telkom shares adds to the R19,1m he was paid for running Telkom in the year to March 2008.
Explaining that package at an AGM in September last year, Telkom chairman Shirley Lue Arnold said a “large part” of it was related to a restraint of trade agreement Telkom had entered into with its new CE.
The 2008 annual report states September’s package as a basic remuneration of R2,4m (including R1,4m he was paid as acting CE), a performance bonus of R3,4m and “fringe and other benefits” of R13,2m.
Arnold said at the AGM that was a “oneoff cost” associated with a retention bonus and a restraint of trade. She said the agreement merely sought to bring the public utility in line with other listed companies’ best practice. However, no reference was made to any shares being part of the agreement (September already held 7 155 shares last year), possibly misleading shareholders about his remuneration package. That pushes September’s remuneration for the 2008 financial year to more than R27m, a record for any Telkom executive.
September’s predecessor – Papi Molotsane – was paid a total R12m during 2008 (the year he left) and R3,9m the previous year, while Sizwe Nxasana was paid R6,6m in 2006. Previously, Telkom’s CEs didn’t enter into any restraint of trade agreement.
The restraint of trade agreement can also be blamed for the surge in Telkom’s remuneration costs for its directors, from R7m in its 2007 financial year to R35,8m. That was the case even though its net profits fell 8,2% to R8,1bn.
Telkom didn’t respond to our written questions until well after the stipulated deadline, meaning that minority shareholders are still in the dark as to what exactly their CE is paid. All its media division would say is that it doesn’t comment on the remuneration packages of directors and referred Finweek to the company secretary, who promised to respond in writing.
It would be interesting to know if the R8,1m worth of shares September received is indeed a “one-off cost” in addition to the other “one-off cost” Arnold told shareholders about. Why did Telkom not mention the shares in September’s package in its annual report?
New Clicks’ Michael Harvey sold 317 000 of his shares in the retailer, raising R5,1m. Harvey’s sale adds to a series of share sales by New Clicks’ directors since January 2008. Over that period they recorded a net sale of 1,61m shares (at between 1382c and 1650c/ share), having bought only 35 200 shares. The directors’ trades reveal well-timed transactions, as the average prices recorded for the sale of shares are higher than New Clicks paid since May 2006, when it bought back and delisted a total of 64,5m shares at an average price of 1362c/share, according to the company’s investor relations department.
New Clicks’ retail expertise also shows in its December trading update, issued in January, which showed retail sales increased by 11,1% for the four months to end December 2008. That includes a 13,1% jump in turnover at toiletries and small household retail arm Clicks. “The strong value offer in Clicks continues to appeal to consumers who are under financial pressure,” is what New Clicks had to say about its experience in the smaller items it sells. It said growing return on equity by 35% to 40% remains its strategic objective.
Elsewhere, construction company Sanyati Holdings’ Rowan Crowie donated over 1,1m shares to previous employees of Ruthcon, which is now part of Sanyati. Crowie held 50% of Ruthcon before its sale to Sanyati. “During the negotiations, and included in the purchase and sale agreement was that the vendors would set up a trust and donate approximately 3m shares to the previous employees of the company,” says Sanyati group financial director, Marc Krouse. He says delays in setting up the trust and “resolving all the legal and taxation issues” are the reason the shares have only just been transferred.
Two Investec directors, Hendrik du Toit and Bradley Tapnack, sold a combined R8,3m worth of the banker’s shares, both in Johannesburg and London.
At mining company Metorex, Albert Barrenechea and deputy chairman Robert Still subscribed for R29m worth of shares at the clawback offer price of 200c/share. The offer wasn’t fully subscribed and the unsubscribed 34m shares were allocated to the company’s major shareholders, among which are the Public Investment Corporation, Stanlib Asset Management and Coronation Asset Management.