Shareholders with no say on executive pay

TOP 100: BLUE CHIPS THAT KEEP INVESTORS IN THE DARK

We’re already busy implementing King III, but reining in executive pay remains as elusive as ever in some Top 100 companies.

While 14 of the Top 100 JSE-listed companies are under fire from shareholders with more than 25% of them voting against remuneration resolutions at annual general meetings (AGMs), a further 12 unbelievably don’t offer a vote (binding or not) at all! Of these 12, five are locally registered, while the remainder are registered elsewhere with (mostly) secondary listings on the JSE.

The five locally-registered companies with primary listings which don’t offer a vote (in order of market capitalisation):

Remgro PSG Group EOH Curro Holdings Zeder Investments

Of these, three are PSG-related companies. Of the other two listed entities related to PSG, Capitec and PSG Konsult, only the former offers a vote on remuneration.

PSG Konsult – excluded from this analysis as it is outside the Top 100 – maintains King III principle 2.27 requiring a shareholder vote on remuneration is “applied”. PSG Konsult states that “director remuneration is approved at the AGM each year”. But the only resolution related to remuneration that is voted on is an approval of non-executive director remuneration (special resolution 1 in 2016).

The King III Report on Corporate Governance, states in Principle 2.27: “Every year, the company’s remuneration policy should be tabled to shareholders for a non-binding advisory vote at the annual general meeting. This vote enables shareholders to express their views on the remuneration policies adopted and on their implementation.”

Other Top 100 companies which do not offer a vote on remuneration (in order of market cap):

Steinhoff International Holdings (registered in The Netherlands as of December 2015) Reinet (Luxembourg) New Europe Property Investments (NEPI, Isle of Man) Brait (Malta) Rockcastle Global Real Estate (Mauritius)

Globe Trade Centre (Poland)

But, when Steinhoff was registered primarily in South Africa, shareholders voted on remuneration in December 2014. It won’t be voted on in March 2017; only approval for remuneration of the supervisory board will be sought.

NEPI says in compliance with King III “shareholders have approved the company’s remuneration policy”. However, this was not voted on in 2014, 2015 or 2016.

Remgro says the group’s executive remuneration policy is “carefully considered by the remuneration and nomination committee and is fully disclosed in the integrated annual report”.

PSG Group describes principle 2.27 as “partially applied”. But says members of its remuneration committee are “best placed” to make the call. EOH’s latest update, dated December 2016, says principle 2.27 is “applied partially”. But a shareholder vote on remuneration occurred at neither the 2015 or 2016 or 2017 AGMs. Curro, in its King III report, admits principle 2.27 is “not applied”. It states its board is best-placed to make the remuneration calls.

Zeder says of principle 2.27 that there is “full application”. It argues that the “company’s remuneration policy is approved by PSG Group as part of the management agreement between Zeder and PSG, in light thereof that PSG carries the cost of remunerating Zeder’s directors”. However, the management agreement has been “internalised” as of September 1, 2016. This means that at its next AGM, Zeder should put this vote to shareholders.

Director remuneration is approved at the AGM each year