INTO THE LIGHT

Two re­cent events fo­cus at­ten­tion on the role of com­pany sec­re­taries — and raise some ques­tions

Financial Mail - Investors Monthly - - Contents - writes Ann Crotty

The de­tailed break­down of the 2018 AGM vot­ing re­vealed just how over­whelm­ing the power of the few A share­hold­ers was

Is the com­pany sec­re­tary fi­nally mov­ing out of the cor­po­rate shad­ows — pushed into the lime­light by the in­creas­ing reg­u­la­tory obli­ga­tions they have to deal with?

No doubt com­pany sec­re­taries have al­ways played a huge role in the smooth func­tion­ing of com­pa­nies, but un­til now they’ve been re­garded largely as rel­a­tively silent en­ablers; the peo­ple be­hind the scenes who en­sure things hap­pen; the per­son who gen­tly taps the chair­man on the arm — re­call San­lam’s AGM — to re­mind him he is re­quired to al­low share­hold­ers at an AGM to vote up to the last minute.

But two re­cent sig­nif­i­cant de­vel­op­ments sug­gest the com­pany sec­re­tary is no longer that quiet, unas­sum­ing, easyto-over­look cru­cial cog. In early Septem­ber Naspers made his­tory when it re­vealed that its com­pany sec­re­tary, Gillian Kis­bey-Green, had be­come a mul­ti­mil­lion­aire by dint of the share awards she had re­ceived over sev­eral years of ded­i­cated ser­vice to the com­pany.

The sum in­volved sug­gest Kis­bey-Green was not pe­nalised for any role she may have played in Naspers’s re­fusal to pro­vide a break­down of the AGM vot­ing be­tween the all-pow­er­ful A shares and the al­most-no-power N shares. De­spite JSE reg­u­la­tions, dat­ing back to 2015, re­quir­ing this de­tailed dis­clo­sure, Naspers re­fused to com­ply un­til 2018. The de­tailed break­down of the 2018 AGM vot­ing re­vealed just how over­whelm­ing the power of the few A share­hold­ers was.

But per­haps a lit­tle more sin­is­ter was the JSE’s un­prece­dented cen­sure of PBT Group’s com­pany sec­re­tary. On Septem­ber 3 the JSE re­leased a Sens state­ment out­lin­ing the de­tails of trans­gres­sions of its list­ings re­quire­ments by PBT Group and named Bianca Pi­eters as the trans­gres­sor.

It seems PBT had failed to in­clude “cer­tain manda­tory dis­clo­sures re­quired for a gen­eral au­thor­ity to re­pur­chase shares res­o­lu­tion in the no­tice of AGM” and had also failed “to pro­cure a res­o­lu­tion by the board of direc­tors to au­tho­rise the var­i­ous re­pur­chases”.

Ap­par­ently, it wasn’t at just one AGM that PBT fell foul of JSE reg­u­la­tions: the group im­ple­mented sev­eral re­pur­chases of its shares be­tween 2014 and 2018 but did not pro­vide the nec­es­sary dis­clo­sure in any year. And, in a re­mark­able over­sight of one of the Com­pa­nies Act’s most ba­sic re­quire­ments, it failed to en­sure the board had un­der­taken the sol­vency and liq­uid­ity test needed be­fore any re­pur­chase can be made.

“The role of a com­pany sec­re­tary … is to pro­vide direc­tors with guid­ance in their du­ties, re­spon­si­bil­i­ties and pow­ers and to make direc­tors aware of all laws and reg­u­la­tions rel­e­vant to the com­pany,” said the JSE, ad­ding that the com­pany sec­re­tary takes re­spon­si­bil­ity for pre­par­ing the an­nual re­port and en­sur­ing that statu­tory and reg­u­la­tory dis­clo­sures are val­i­dated.

Es­sen­tially the JSE was ab­solv­ing the much more pow­er­ful — and bet­ter-paid — direc­tors from any obli­ga­tion to know any­thing about th­ese crit­i­cal mat­ters.

For­tu­nately for Pi­eters there was no re­quire­ment on PBT to is­sue a sep­a­rate Sens state­ment. John Burke, the JSE’s di­rec­tor of is­suer reg­u­la­tion, tells IM the Sens is­sued by the JSE would have been seen by share­hold­ers. “In some cases in the past, com­pa­nies have vol­un­tar­ily re­leased an­nounce­ments around cen­sures, pro­vid­ing fur­ther con­text on the mat­ter.”

PBT, which sold off as­sets in 2018 to fo­cus on IT, opted not to is­sue a Sens state­ment deal­ing with the cen­sure. So, apart from Pi­eters and a pos­si­ble hand­ful of in­di­vid­u­als who are a tad ob­ses­sive about th­ese sorts of things, it’s safe to say it es­caped gen­eral no­tice.

One per­son who did spot it was share­holder ac­tivist Al­bie Cil­liers, who makes it his busi­ness to no­tice th­ese things. Cil­liers had brought PBT’s gen­er­ally poor lev­els of dis­clo­sure to the at­ten­tion of the JSE al­most two years ago in the run-up to the sale of the group’s non-IT as­sets.

He was try­ing to de­ter­mine whether any re­lated par­ties were in­volved in the pur­chas­ing of the as­sets or the sale of PBT shares back to the com­pany at around the same time. The group’s web­site pro­vides lit­tle gov­er­nance-re­lated in­for­ma­tion.

Cil­liers, who was a share­holder, re­quested in­for­ma­tion the Com­pa­nies Act en­ti­tles him

to. E-mails be­tween him and Pi­eters out­line a fruit­less ex­er­cise, which meant it was ex­tremely dif­fi­cult for the ac­tivist to make an in­formed opin­ion on ei­ther the as­set sale or the share re­pur­chase.

Cil­liers wasn’t too happy with the JSE’s cen­sure and, though un­happy about his en­gage­ments with Pi­eters, he be­lieves she has been used as a scape­goat.

“The Com­pa­nies Act does place a lot more re­spon­si­bil­ity on the com­pany sec­re­tary, who has es­sen­tially be­come the front­line for cor­po­rate gov­er­nance, but it’s dif­fi­cult to be­lieve it was Pi­eters alone who de­cided to with­hold the in­for­ma­tion I was en­ti­tled to,” Cil­liers tells IM.

One cor­po­rate lawyer, who agrees com­pany sec­re­taries do now have more re­spon­si­bil­ity, says th­ese re­spon­si­bil­i­ties fall way short of what Pi­eters is be­ing held re­spon­si­ble for.

“In terms of sec­tion 88 the com­pany sec­re­tary is ac­count­able to the board and is re­quired to in­form the board of any fail­ure to com­ply with the act or the com­pany’s MoI [me­moran­dum of in­cor­po­ra­tion]. It is the board that should be cen­sured and if it was not in­formed then the board should act against the com­pany sec­re­tary,” says the lawyer.

More chill­ing from a gen­eral gov­er­nance per­spec­tive is that Cil­liers says Pi­eters’s re­fusal to pro­vide the re­quested in­for­ma­tion is par for the course. “I have sent re­quests to about a dozen com­pa­nies ask­ing for in­for­ma­tion to which I’m en­ti­tled — not one of them had it timeously or cor­rectly.”

While Naspers’ Kis­bey­Green and PBT’s Pi­eters are the most re­cent to be dragged into the spot­light, the days of the com­pany sec­re­tary in­hab­it­ing the qui­eter cor­ners of cor­po­rate life were prob­a­bly num­bered by the time Eskom’s Suzanne Daniels was fired in July 2018.

As a re­cent re­port by the Char­tered Sec­re­taries South­ern Africa re­calls, Daniels had a me­te­oric rise at Eskom. Dur­ing her ten­ure as com­pany sec­re­tary, for which she was paid R2.7m a year, she was in­volved in a num­ber of du­bi­ous pay­ments, in­clud­ing the R1.6bn to McKin­sey/Tril­lian and the R659m to Tegeta. Daniels re­vealed much of this dur­ing a par­lia­men­tary hear­ing in 2017 but failed to se­cure whistle­blower sta­tus as most of the in­for­ma­tion was deemed to be al­ready in the pub­lic do­main by then.

In May 2018 a colum­nist, in an ar­ti­cle on the SA Ac­count­ing Acad­emy web­site, noted that SA’s ac­count­ing and au­dit­ing pro­fes­sions had been hit hard by a slew of value-de­stroy­ing scan­dals — stretch­ing be­yond the Gup­tas to Stein­hoff and VBS Mu­tual Bank. But, asks the colum­nist, where were the other pro­fes­sion­als such as the com­pany sec­re­taries? “As the cus­to­di­ans of cor­po­rate gov­er­nance and be­ing in­ti­mately aware of board dis­cus­sions, and res­o­lu­tions to au­tho­rise large-scale cash move­ments, it can well be asked what is the com­pany sec­re­taries’ role in pre­vent­ing un­law­ful trans­ac­tions.”

By all ac­counts very few of the Stein­hoff board mem­bers had any idea of the large-scale du­bi­ous cash move­ments. Given spec­u­la­tion about for­mer CEO Markus Jooste’s unique sign­ing pow­ers, it’s also pos­si­ble the com­pany sec­re­tary had no idea.

How­ever, the SA Ac­count­ing Acad­emy colum­nist’s sug­ges­tion that the com­pany sec­re­tary should also be held re­spon­si­ble for Sa­gar­matha’s fail­ure to list in April 2018 hints at the near im­pos­si­bil­ity of the chal­lenges they are ex­pected to ad­dress.

The colum­nist notes it was a com­pany sec­re­tar­ial fail­ing that cost Sa­gar­matha its list­ing on the JSE. “Sa­gar­matha failed to en­sure that their fi­nan­cial state­ments were filed at the CIPC [Com­pa­nies & In­tel­lec­tual Prop­erty Com­mis­sion], re­sult­ing in the JSE re­fus­ing their list­ing,” said the colum­nist of a ven­ture that re­lied en­tirely on a R4bn in­vest­ment from the Pub­lic In­vest­ment Corp (PIC).

Long be­fore the Mpati com­mis­sion of in­quiry re­vealed the bizarre and value-de­stroy­ing think­ing be­hind much of the PIC’s multi­bil­lion-rand in­vest­ments, it was ev­i­dent Sa­gar­matha was value-less and faced lit­tle chance of suc­cess. A slack com­pany sec­re­tary was the least of its prob­lems.

The irony, as demon­strated by the Sa­gar­matha saga, is that a com­pany sec­re­tary needs the sup­port of the board if they are to hold that board to ac­count. As they emerge from the shad­ows they might be more as­sertive in se­cur­ing this sup­port. It will be no easy task. ●

Pic­ture: 123RF — EVERYTHING­POSSIBLE

Pic­ture: 123RF — HAFAKOT

Pic­ture: FREDDY MAVUNDA

Suzanne Daniels … paid R2.7m a year

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