There have been troubling signs in recent weeks that some of SA’s largest companies aren’t exactly entirely committed to the notion of “shareholder democracy” .
Last week, one executive from embattled fishing giant Oceana implored Des Mayers, an analyst at Afrifocus Securities, not to ask his questions publicly at the AGM, but rather do so in a private meeting later.
Mayers, rightly, told Oceana where to get off. But even then, he says, it “cherry-picked” which of his questions it chose to answer at the AGM.
You can see why the company would be nervous: Mayers had wanted Oceana to explain why two former top executives were paid R212m between 2014 and 2021, while shareholders got no payout for most of those years. “It is abundantly clear that while shareholders were on the ‘back burner’, the directors were very well rewarded. This is unacceptable,” he says.
Even before this, Oceana wasn’t exactly on solid ground. With no full-time CEO, a CFO suspended on murky grounds, and all the commitment to transparency of an ANC cadre deployment committee, you can see why its stock has plunged 44% from five years ago.
But Oceana isn’t the only company trying to short-circuit “trouble” by steering shareholders into private rooms, or asking investors to submit “written questions” before an AGM, presumably to be vetted.
Chris Logan, owner of Opportune Investments, says the best companies don’t do this. “Anglo American held a model AGM a few weeks ago, where they only got to vote after nearly three hours, because they were taking questions from everyone. Sure, some of the questions were pretty painful, but they made a point of doing it,” he says.
And meeting with only select investors has plenty of downside, as retailer Spar can attest.
A few weeks ago, Spar appeared to breach JSE rules when it held a “private meeting” with clients of just one shareholder, SBG Securities, at which it revealed that its SA sales had risen more than 6% in the previous seven weeks.
Clearly, this shouldn’t have happened. Every executive with even a passing notion of governance knows that any market-sensitive information (such as sales) has to be given to all investors at the same time — not just the lucky institutions who happened to be in the room.
Shortly afterwards, it was the case of TFG, whose management held a “private broker call” with RMB, and the day after, trade in the share curiously soared sixfold.
When it comes to corporate SA, Orwell’s skewering of Joseph Stalin’s regime is prescient
It’s a disturbing trend, indicating how certain CEOs prefer meeting the large institutions “privately”, rather than holding investor sessions open to all — even the truculent ones who ask impertinent questions.
Says Logan: “It’s a reality that companies will always engage with their biggest shareholders, and it’s the job of the institutional investors to engage with these companies. But it ought to be counterbalanced by [the executives] committing to robust engagement at AGMs.”
The truth is, it would be a misstep to curb the ability of executives to meet shareholders, or to insist they only speak to investors during results presentations or AGMs.
More transparency, not less, is what’s needed. So it’s commendable of Spar and TFG to meet investors — but less admirable if they choose to meet only their largest shareholders, and to snub the rest. And, obviously, CEOs shouldn’t tip off some investors as to what might happen.
Charl Kocks, head of Ratings Afrika, and Proxy View’s Theo Botha say disclosing information to select institutions is not right, fair or wise.
“The concept of fair dealing, linked with the kind of transparency required for publicly listed companies, is based on the precept that all shareholders should be treated equally, in information terms,” they say.
Of course, you can see why CEOs would prefer the probing to happen behind closed doors: discontent about strategy, botched acquisitions or sky-high pay packages is best soothed in the reassuring sanctity of a back office, with nougat biscuits and calming doses of rooibos.
But this helps nobody — least of all smaller retailer investors who would benefit from learning of the warning signs often picked up by experienced asset managers.
As Kocks and Botha put it: “We had better learn, and learn quickly, that even highly adverse views need airing, in circumstances conducive to learning to accommodate differences of opinion.”
It has become fashionable to quote Animal Farm, George Orwell’s seminal 1945 satirical novel, as a warning for every social ill, from potholes to looting of Covid funds.
But when it comes to corporate SA, Orwell’s skewering of Joseph Stalin’s regime is prescient.
At one point, Napoleon the pig, who has assumed control of the farm, announces a diktat that the weekly Sunday morning meetings will cease, as they are “no longer necessary”. Instead, he says, “all questions related to the working of the farm would be settled by a special committee of pigs, presided over by himself. These would meet in private and afterwards communicate their decisions to the others.”
As Kocks and Botha point out, SA’s largest companies can’t afford a situation where they’re sending a message that while every shareholder is “equal”, some are more equal than others.
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