Executive compensation and improper wealth

It may be time for regulators, including JSE, to reconsider how to deal with shareholder opposition to executive compensation.

According to the current situation, if more than 25% of shareholders vote against the company’s remuneration policy or its executive report at the annual general meeting, the company must invite shareholders with different opinions to participate. This is a JSE requirement. The “Company Law” does not require such requirements. The bill takes a completely weak approach to the highly controversial issue of executive compensation, which has led people to believe that this part of the bill was written by the business community.

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What this weak method does is ask the company to provide shareholders with two non-binding advisory votes, one on the remuneration policy and the other on how the policy is actually implemented. This means that shareholders, or more precisely the institutions that manage stocks on our behalf, have the opportunity to send some virtue signals.

They can vote against these two compensation-related resolutions, knowing that nothing will happen. Nothing happened.

JSE tried to prevent possible bidding by introducing a requirement to participate in the case of more than 25% of the negative votes in order to align this unstable process with major international markets. The problem is that no one wants to participate in these activities.

The overwhelming majority of shareholders who voted against remuneration were too lazy to follow up. If they follow up privately, it will make the JSE requirements obsolete.

Did not appear in Sanlam last time. At the annual general meeting of shareholders on June 9, 26.08% of shareholders voted against the remuneration implementation report, and were subsequently invited to submit their concerns in writing to the head of group rewards; engagement plan no later than July 14 . Sanlam announced last week that it had not received any written questions and no one had accepted its engagement invitation.

This is not the first time this has happened to a JSE listed company. Usually, when agreements actually occur, they only involve a few shareholders who hold different opinions.

Of course it’s time to change?

Medical treatment

On the thorny issue of executive compensation, Mediclinic’s announcement last week indicated that the practice of paying dividends before stocks vests is a fairly common practice.

Mediclinic granted stock option awards to three executive directors for the deferred short-term incentives for the fiscal year ending March 2019. They vested on July 20 and will settle in cash on July 27.According to the Mediclinics announcement, the settlement amount includes the value of dividends attributable to the vested shares from the grant date to the exercise date

However, must the rights of these shares, including the rights of dividends, be triggered only from the date of vesting?

Naspers, Prosus and Tencent

Continue to discuss the issue of executive compensation and the generation of improper wealth. If Chinese President Xi Jinping does not stop the attrition war with the country’s powerful technology companies, Naspers and Prosus’ rewards may face some pressure.

After it was announced last week that Tencent was ordered to give up its exclusive music streaming rights and paid a fine of 500,000 yuan, Tencent’s stock price fell to its lowest level this year.

It seems that Xi Jinping is not just worried about the extraordinary wealth and power possessed by apparently hostile participants such as Jack Ma of Alibaba, but anyone.

Compared with the outspoken Jack Ma, Tencent CEO Ma Huateng (it doesn’t matter) has always supported the Chinese Communist Party.

For Xi Jinping, who is preparing to reduce the power (and wealth) of these large independent companies to consolidate his authority, this is clearly not enough.

telecommunications

At the same time, there is a less powerful Telkom on the land of South Australia.

Compared with most other government-related entities, the past eight years have been very successful for Telkom, with the government as its main shareholder, which owns 40% of the shares.

Sipho Maseko, the outgoing CEO, must bear most of the responsibility for this.

He led the company in a particularly challenging period and nearly 30% was forced to ignore the Communications Workers Union (CWU) through a reduction in the number of bloated employees. It is understandable that there is no unhappy, watching him go to many people to oppose.

The number of Telkoms employees has been reduced from 21,209 in 2013 to approximately 15,000 at present.

It can be expected that CWU will not be as excited about Masekos’ achievements as some analysts. It argued that he failed to use Telkoms’ monopoly to manage the transition from ADSL to optical fiber and caused many long-term customers to lose to new players in the market. The union stated that its ability to report profits is largely due to these massive layoffs.

Sadly, in the post-Zuma era, its ability to report profits at all levels is a major success.

Read: Sipho Maseko will resign as CEO of Telkom