An event to re­mem­ber

Naspers chair shuts down share­holder ac­tivist at AGM, writes Ann Crotty

Financial Mail - Investors Monthly - - Feature -

As AGMs go, it was an un­usual af­fair. As Naspers AGMs go, it was an ex­treme af­fair, with share­holder ac­tivist Theo Botha com­ing close to in­ter­ro­gat­ing the su­per-sen­si­tive and su­per-valu­able is­sue of share in­cen­tive trusts.

In a con­tro­ver­sial move that might be a con­tra­ven­tion of the Companies Act, chair­man Koos Bekker shut down ques­tion­ing be­fore Botha could ask for an ex­pla­na­tion of pro­posed amend­ments to the three trusts, in­clud­ing trans­fer­ring the domi­cile of one from Mau­ri­tius to Dubai.

Since Naspers listed in 1994, its AGMs have been tightly chore­ographed events de­signed to en­sure no room for sur­prise. Even after Naspers hit the big time with its Ten­cent in­vest­ment, the AGM re­mained re­mark­ably grey and pre­dictable. For the past 10 years, it has con­tin­ued to be an event dom­i­nated by white males in suits who come to give thanks to the board. It has reeked of un­ques­tion­ing grat­i­tude.

The com­fort­able, sym­bi­otic re­la­tion­ship has suited the fund man­agers and the board — ap­pro­pri­ately so, given that the com­pany has been the largest source of pas­sive wealth cre­ation in this coun­try.

But then share­holder ac­tivist Botha bought a share. In 2016 he de­stroyed all at­tempts to keep the meet­ing flow­ing along the lines of the pre­pared agenda. Botha had come to do what he does best: ac­tively and openly en­gage with the board for the ben­e­fit of the mil­lions of pen­sion­ers and work­ers whose fund man­agers don’t bother.

To this end Botha has done more to shake up the dan­ger­ously cosy re­la­tion­ship be­tween com­pany boards and fund man­agers than any other in­di­vid­ual, in­sti­tu­tion or code in­volved on the JSE. For those on the re­ceiv­ing end it is an in­tensely un­com­fort­able ex­pe­ri­ence, made all the more galling by the fact that Botha comes ex­tremely well pre­pared and usu­ally with just one share.

To date, Rem­gro’s Johann Ru­pert has been the only top cor­po­rate ex­ec­u­tive to emerge from the ex­pe­ri­ence with his rep­u­ta­tion en­hanced. Though ini­tially taken aback, Ru­pert quickly got into the swing of things. Far from be­ing de­fen­sive, he used Botha’s at­ten­dance at Rem­gro AGMs to demon­strate his grasp of gov­er­nance is­sues as well as lo­cal and global in­vest­ment con­di­tions. In this case, ev­ery­one ben­e­fited a lit­tle from Botha’s in­volve­ment.

Ru­pert was the ex­cep­tion; most CEOs and chair­men buckle from the un­usual ex­pe­ri­ence of be­ing chal­lenged.

Naspers chair­man Bekker buck­led big time. At the 2016 AGM he threat­ened to have Botha thrown out of the meet­ing if he per­sisted in ques­tion­ing why he was not al­lowed ac­cess to doc­u­ments he was en­ti­tled to un­der the com­pany’s me­moran­dum of in­cor­po­ra­tion.

As Botha per­sisted, the mood of the AGM grew darker — so dark that, in a re­mark­able demon­stra­tion of in­tol­er­ance for non­chore­ographed con­tri­bu­tions, long-serv­ing direc­tor Boet van Zyl staged a walkout and in­vited other share­hold­ers to join him. None did.

Botha failed to get ac­cess to the doc­u­ments at the AGM, but he promptly fol­lowed up with a lawyer’s let­ter. “It is an of­fence for a com­pany to fail to ac­com­mo­date any rea­son­able re­quest for ac­cess, or to un­rea­son­ably refuse ac­cess, to any record that a per­son has a right to in­spect,” said Botha’s lawyer.

Botha even­tu­ally got what he had been look­ing for: ac­cess to Naspers’s share in­cen­tive trust deeds.

As the name sug­gests, the de­tails of these trusts ex­plain Naspers man­age­ment in­cen­tives. At stake is ac­cess to po­ten­tially enor­mously valu­able Naspers shares. Given the con­sid­er­able dis­cre­tionary pow­ers in­volved, the trus­tees are es­sen­tially able to de­cide who among Naspers’s em­ploy­ees will be­come mil­lion­aires. Botha be­lieves these doc­u­ments, more than any­thing else, ex­plain how Naspers func­tions.

So, fast-for­ward to the Au­gust 2017 AGM. Back comes Botha with his Naspers share. The set­ting for the event has changed — a larger room is needed to ac­com­mo­date the greater num­bers of share­hold­ers and me­dia likely to at­tend

Botha even­tu­ally got what he had been look­ing for: ac­cess to Naspers’s share in­cen­tive trust deeds

the ex­pected show­down.

It’s quickly ev­i­dent that Bekker is way out of his com­fort zone. This is a meet­ing that is un­likely to go ac­cord­ing to the care­fully pre­pared agenda. Re­mark­ably, a copy of that agenda is placed on ev­ery seat, giv­ing all in at­ten­dance an op­por­tu­nity to see just how chore­ographed the event is.

After some in­sight­ful views on Naspers’s po­si­tion vis-à-vis the global tech­nol­ogy in­dus­try, Bekker makes some jaw-drop­ping com­ments on cor­po­rate gov­er­nance: es­sen­tially, good gov­er­nance is a nice-to-have add-on, but don’t let it dis­tract you from run­ning the com­pany.

Then comes a de­fence of Naspers’s de­ci­sion not to sell Ten­cent, de­spite grow­ing con­cerns about the ap­prox­i­mate R400bn value-trap ex­pressed by fi­nan­cially il­lit­er­ate peo­ple, ac­cord­ing to Bekker. (This seems like a blind­ingly good de­ci­sion to have made, though it is worth point­ing out that no share­holder has ac­tu­ally called for a sale of Ten­cent; some have sug­gested shares in the hugely suc­cess­ful Chi­nese IT com­pany be un­bun­dled to Naspers share­hold­ers.)

Even­tu­ally it is time for ques­tions and com­ments from share­hold­ers. Un­til 2016 this part of the AGM was done and dusted in about seven min­utes. But, in a bid to pre­vent a re­peat of the 2016 meet­ing, Bekker says ques­tions will be taken in lots of three and al­lo­cated to the most knowl­edge­able per­son in the room. There’s lit­tle doubt that this is de­signed to di­lute the shat­ter­ingly in­tense ef­fect of Botha, and for a while it seems to work. It is dif­fi­cult to fo­cus on Botha’s ques­tions about key per­for­mance in­di­ca­tors and plans to turn the core Naspers busi­nesses to ac­count when they’re in­ter­spersed with ques­tions about DStv’s sports chan­nels and blockchain tech­nol­ogy. But Botha is noth­ing if not dogged — and be­cause AGMs are the equiv­a­lent of his nat­u­ral habi­tat, he can­not be rat­tled at them.

At 12.30 pm, just as it seems Botha is get­ting into his stride and lead­ing up to the res­o­lu­tion deal­ing with the pro­posed amend­ments to the share in­cen­tive trusts, Bekker rules that there will be no more ques­tions. His move is re­mark­able, as it seems even he has gone off-script — the agenda has him ask­ing share­hold­ers if they have any ques­tions on the res­o­lu­tions. Botha’s protests fall on deaf ears.

We may not have heard the last of the mat­ter. Botha rarely takes no for an an­swer. The only thing at is­sue is whether or not he will wait un­til Au­gust 2018 to get an­swers to the ques­tions he wasn’t al­lowed to ask this year.


Theo Botha … No an­swer on pro­posed amend­ments to Naspers’s share in­cen­tive trusts

Naspers chair­man Koos Bekker Pic­ture: TREVOR SAM­SON

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