PPC’s rules add spice to meeting
Full board under fire while PIC voting rights in question
THE special shareholders’ meeting of cement giant PPC, now set down for December 8, is certain to be this year’s most entertaining corporate pantomime — thanks to a controversial section of PPC’s memorandum of incorporation, as well as a Competition Tribunal order affecting the Public Investment Corporation’s (PIC’s) right to vote its 12% stake.
The controversial shareholders’ meeting was called by asset manager Foord and Visio Capital Management, who held at least 10% of PPC, to re-elect a new board. This follows a messy public spat in which Ketso Gordhan quit as CEO in September after he was stopped from getting rid of his finance director, Tryphosa Ramano. Gordhan then tried, unsuccessfully, to rescind his resignation.
The battle heated up this week, as PPC executive chairman Bheki Sibiya hit out at Gordhan, saying his reasons for demanding Ramano’s departure were petty — including the fact that she had a “bigger office” than he did. Gordhan was also supposedly upset that while most PPC executives heeded his request that they forego salary increases, Ramano did not agree.
While new directors have been nominated to serve on a “new board” after the December meeting, it remains impossible to predict the outcome of the meeting.
It appears that Foord was forced to call for the removal of all PPC’s directors because of a particularly unusual clause in the PPC constitution, which says: “Shareholders will not be entitled to propose directors for nomination to the board, unless there are no directors of the company.”
Charl Kocks, the CEO of Ratings Afrika, describes this section as “extremely unusual” in that it deprives shareholders of “one of their very basic rights”.
That section was approved by PPC’s board and the JSE in June 2012. At the time, it didn’t break JSE rules — but less than two months later, the JSE amended its listing requirements to effectively block that sort of clause.
Andre Visser, the JSE’s general manager of issuer services, believes the fuss around PPC’s rules is overstated.
Visser is adamant that “the JSE listings requirements will always supersede the company’s memorandum of incorporation. This is important because companies would not necessarily amend their [rules] each time that the JSE implements changes to the listings requirements,” he says.
Foord has said this controversial section had forced it to push for the removal of all directors, rather than just a few.
Daryll Owen, Foord’s deputy chief investment officer, said on Friday that if Visser was correct, each of the current directors could make representations to shareholders at the December meeting as to why they should be voted back on.
“Obviously only shareholders who are in attendance at the meeting would have an opportunity to vote on their reappointment, shareholders who vote by proxy would not have that opportunity,” Owen said.
One shareholder, the stateowned PIC, may welcome the chance to retain some directors.
Speaking about the increasingly hostile battle this week, the PIC said it liked to see continuity on the board.
“It is within this context that the PIC does not favour the removal of an entire board . . . the PIC would like to see all stakeholders act with prudence and urgency to ensure that the board issues are resolved and that the process of appointing a new CEO can be concluded quickly,” it said in a statement.
Now, in a further twist to this year’s most dramatic corporate saga, it is possible that even the PIC’s right to vote at the special meeting will be challenged.
In December 2011, after the PIC bought a controlling stake in rival cement firm Afrisam, the Competition Tribunal ruled that for as long as the PIC controlled Afrisam “it shall not have any board representation on PPC or any other cement producer in South Africa”.
One leading competition law specialist, who did not want to be named, said it would be a stretch to use this to block the PIC from voting at the meeting.
“The idea behind the order was to prevent collusion between two companies in which the PIC has a stake,” he said — which isn’t the case here.
But he said that if some party was determined to block the PIC from voting, the tribunal decision might prove useful.