Fury over MTN pay hike policy
40% VOTE AGAINST REMUNERATION ENDORSEMENT MTN is facing stiffening resentment over its salary package policies – if last week’s AGM outcome is anything to go by.
Nearly 40% of MTN shareholders voted against the advisory endorsement of the group’s remuneration policy at its AGM on Thursday. Only 62.64% of those who voted, did so in favour.
That’s significantly lower than the 67.81% who voted yes at the AGM last year and a far cry from 2015’s 94% “yes” vote. Chris Maroleng, MTN group executive for corporate affairs, says MTN has taken note “of the fact that some shareholders voted against it. We will be engaging with these shareholders”.
Given the large vote against the group’s remuneration policy, it is almost certain its largest shareholder, the Public Investment Corporation (PIC), voted no, as it did at the May 2016 AGM.
The PIC, which manages assets on behalf of the Government Employees Pension Fund, held 14.92% of MTN as at December 31, 2016.
Last year, it noted it voted no because “in terms of the company’s STI [short-term incentive] and LTI [long-term incentive] schemes, the KPIs [key performance indicators] remain financially skewed with no sustainability measures. This is regardless of the fact that the group executive directors did not meet the performance bonus in 2015”.
In its remuneration report, MTN notes only one executive director was paid a bonus: Phuthuma Nhleko, who took over as executive chairperson (from his previous non-executive role after the departure of Sifiso Dabengwa in 2015). Through his professional services entity, Captrust Investments, Nhleko was paid a bonus of R38.191 million on top of a salary of R30 million (R2.5 million a month).
The group says the board negotiated his package “in recognition of the unprecedented circumstances surrounding his appointment”.
The report states Nhleko was required to commit 100% to the MTN task and step away from his “considerable other” commercial interests. Nhleko’s mandate was to negotiate a reduction of the Nigeria fine.
Old Mutual’s Electus Boutique voted against the endorsement at Thursday’s AGM. It says such a vote is “warranted” for two reasons. First, “for the second consecutive year, significant (R19.6 million) loss of office payments have been made to the former CEO, who left the company abruptly as a large fine was being negotiated with the Nigerian government in settlement of events which occurred during his tenure as CEO”.
According to MTN, Dabengwa was paid this amount as “compensation for loss of office, comprising notice pay and a restraint of trade payment”. In 2015, he was paid R23.664 million as compensation for loss of office.
The second reason, says Electus, is that “chairperson Phuthuma Nhleko was paid R30 million in salary and a bonus of R38.2 million for services provided as interim executive chairperson during FY2016. This is an exceptional level of remuneration in the South African market context”. Maroleng makes the point that “MTN faced an extraordinary set of challenges over the last 18 months”. Alternative steps were taken to stabilise the business in the wake of the MTN Nigeria fine, “given the recent significant changes”, he said.