Bold action on pay still cowers at mention of retention

NOT all companies are prepared to take the sort of bold action recently announced by the board of buildings material group Distribution and Warehousing Network, or Dawn.

Two executive directors at the company had to pay back a R7-million bonus they picked up for their perceived role in establishing a new venture for the company.

They also lost out on exercising generous options awarded to them in 2012. The main reason for the tougher board stance was the determined action taken by a few small shareholders, who prodded the large shareholders, Coronation Fund Managers and Imperial Holdings, into action.

In the absence of such action, there seems little chance of any restraint on inappropriately generous remuneration packages.

Over at Sovereign Foods, efforts by a handful of small shareholders have so far failed to produce the sort of effective response seen at Dawn. The board of this comparatively small chicken producer (annual revenue of R1.6-billion compared with fellow chicken company Astral’s R9.6-billion) is sticking to the line that it has to pay its executives at least as much as Astral does because they work as hard.

It was all about benchmarks and retaining executives, said the board. If Sovereign did not pay as much as Astral, its executives would leave.

Benchmarks and retention are also used to justify remuneration at Growthpoint Properties, whose share is trading around the same level it was three years ago.

The property company’s board is also determined to ensure its remuneration is “appropriately benchmarked, relevant and reasonable”. Retention in “this fiercely competitive market for key talent” is critical in the design of the remuneration policy, shareholders were told.

The hefty 35% vote against the remuneration policy at Growthpoint’s recent AGM may have taken the board by surprise.

Only one proxy adviser had recommended voting against the remuneration report. (Votes on the remuneration policy are nonbinding and are often used to send a message to the board or just to give the impression the shareholders are awake to their responsibilities.)

One small shareholder said the hefty fees paid for attending board meetings were reason enough to vote against the company’s remuneration policy. In addition to a basic fee of R1.1-million for financial 2016, the chairman will be paid R185 500 for each board meeting he attends.

The company said it took the vote on remuneration seriously and would review what could be improved upon.