Petrol thrown on Sasol fire
Directors will get nothing if 75% of shareholders vote against directors’ pay.
Sasol’s non-executive directors have offered up 20% of their board fees in what is seen as a bid to secure sufficient shareholder support for continued payment of their generous package of fees and allowances.
The gesture came just days before today’s annual general meeting (AGM), which could see shareholders demonstrate their frustrations about the massive value destruction of recent years by voting against key resolutions.
Failure to secure 75% approval for directors’ remuneration would not only be embarrassing, it would see Sasol make corporate history. In terms of the Companies Act, without that approval, Sasol would not be allowed to pay its non-executive directors fees for any work done during 2021.
Section 66 of the Companies Act says directors’ remuneration “may be paid in accordance with a special resolution approved by the shareholders within the previous two years”.
Doing the bare minimum
Sasol’s non-executive directors’ remuneration has not been approved since its 2018 AGM.
It is the only JSE company that does not put its directors’ remuneration to a shareholder vote. It adheres to the minimum requirements of the law and presents the resolution every second year.
A Sasol spokesperson confi that “if we do not receive 75% of votes cast in favour of this special resolution, we will be, in terms of the Companies Act, unable to pay fees to directors.”
Directors’ fees generally receive overwhelming support from shareholders – even those who oppose the remuneration paid to executives tend to vote in support of directors’ remuneration.
However, criticism by activist shareholders about the steep increase in non-executive fees over the past 10 years despite massive shareholder value destruction has apparently raised concerns.
Board ‘agrees to commit’ to the sacrifice
In a Sens announcement, Sasol said in view of the significant challenges still facing the company and in acknowledgement of the erosion of shareholder value over the past two years, the board had agreed to commit to a sacrifice of 20% on the proposed board fees.
Earlier this week Active Shareholder – a nonprofit that acts “to help socially responsible shareholders exercise their company rights” – issued a proxy advisory note slamming the generosity shown to the non-executive directors.
Excessive fees and generous allowances
“Sasol’s non-executive directors’ fees have shot up 300% over the past 10 years,” said Mike Martin of Active Shareholder.
In addition to the fees, in financial 2021, the non-executive directors are in line to receive generous travel allowances.
The allowance will vary from R86 000 to R260 400, depending on the hours travelled, and will be paid for each of the four board meetings held each year. This is over and above the cost of flights and accommodation.
Martin described this as “unacceptable” in the context of Sasol’s minimum annual wage of R221 146.
While he welcomed the proposed 20% cut Martin noted that it will not affect the generous travel allowance directors are due to get.
It also does not appear to affect the fees for scheduled committee meetings or fees for special purpose ad hoc committee meetings.