British American Tobacco (BAT), the world’s largest global tobacco company and one of the least accountable companies listed on the JSE Securities Exchange, got a justifiable snotklap at its AGM last week in London.
It was a predictable turn of events, given how badly BAT has disappointed investors in recent times. Over the past year, its share price has fallen 29.1% on the JSE — in part because cigarettes have become about as socially desirable as Atul Gupta pitching up at a Save SA rally.
Shareholders clearly aren’t impressed. Which is probably why a quarter of them voted against BAT’s remuneration policy, which led to CEO Nicandro Durante taking home £11.4m (a staggering R193m) and finance director Ben Stevens scoring £6.6m (R112m) last year.
The 37% rise in Durante’s pay is something of a slap in the face, considering shareholders have seen their wealth diminish by nearly a third. Its UK staff only got a 3% increase, so Durante is making out like a bandit.
Institutional Shareholder Services (ISS), which advises investors on how to vote at AGMs, flagged "concerns with the remuneration report", including the steep salary increases for Durante and Stevens, and how the remuneration committee used its discretion to hike executives’ bonuses. (BAT’s board, predictably, voted Durante’s and Stevens’s performances as "outstanding" — despite what the share price would suggest.)
Another 40% of shareholders also voted against BAT’s proposal to re-elect a director, Marion Holmes — seemingly objecting to the fact she sat on six other boards, and was stretched rather thin to be providing oversight to a company with so many butts in the fire.
When the FM asked BAT what its shareholders’ issues with the pay policy were, spokesperson George Parker didn’t answer, saying only that the company was seeking to "engage" with shareholders to "better understand their views". So, they either don’t really know or they aren’t saying — revealing in itself.
But then BAT has always struggled with transparency. In particular, it has spent the better part of two years trying to snuff out a forensic probe into its alleged criminal conduct in SA, where the tobacco company has proven alarmingly central to the state capture saga.
The story is that, back in 2014, it emerged that BAT had paid lawyer Belinda Walter £30,500 to spy on rivals. In a recording, one BAT executive pleads with Walter not to "sell us out" by revealing she was on their payroll, saying "we will never reveal who we pay".
At the time, Sars head of investigations Johann van Loggerenberg warned that BAT’s "concealed" way of paying Walter amounted to money laundering. Back then, Sars had a project named "Honey Badger" aimed at tackling tobacco firms who dodged tax. BAT was no exception: in 2015, Sars lodged a R2bn assessment against it for "debt structuring" practices, dating back to 2006.
What happened next was illuminating. Walter, who had a short relationship with Van Loggerenberg, then laid a complaint against him at Sars. This sparked numerous investigations (not least of which was KPMG’s discredited report into the "rogue unit", which whitewashed BAT’s role out of the story altogether) and ultimately led to Van Loggerenberg leaving the revenue service.
So guess who BAT’s auditors were? Yes, KPMG — who also, it emerged this month, had been using Walter as a consultant. And who ended up as a big winner from Sars’s much-reduced investigative capacity after Van Loggerenberg’s departure? BAT.
All the while, revelations of BAT’s behaviour grew increasingly alarming. For example, Francois van der Westhuizen, who had worked for BAT’s former security consultant FSS, signed an affidavit detailing how the company had bribed police and tax officials to turn a blind eye to "BAT’s tax evasion and money laundering".
In other words, don’t ask us to come clean about the things we said we would come clean about
— Rob Rose
So, this was the cocktail of misconduct that Beirut-born Soraya Zoueihid, who took over as head of BAT SA in 2016, found when she arrived. She promised to take the mess "very seriously", hiring law firm Norton Rose Fulbright to conduct a "thorough" investigation.
That was 18 months ago, and there hasn’t been a peep since — despite the fact that insiders say the Norton Rose Fulbright investigation is apparently complete.
Whatever Zoueihid may have found, she’s evidently resolved to bury it in the basement of BAT’s offices in Dock Road, at Cape Town’s V&A Waterfront.
Asked this week what Norton Rose Fulbright found, Zoueihid’s office didn’t reply. When BAT spokesperson Parker was asked, he said "it would be inappropriate" to comment on matters "that are subject to either ongoing litigation or investigations". In other words, don’t ask us to come clean about the things we said we would come clean about.
But BAT’s ostrich approach was never going to work. This week, the FM served an access to information request on BAT, demanding the full Norton Rose Fulbright report.
If that report is half as devastating as many think, BAT’s reputation is in real danger of going up in smoke. So investors might think they’ve had a hard time in the past year, but the nail-biting is only just beginning.
*The writer has shares in BAT
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