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SIMON BROWN: I’m chatting now with Steven Beattie from Steven Beattie Tuition. Steven, I appreciate the early morning.
Earlier in the week I mentioned it was Just Share that pointed out that executives at Shoprite earn about a thousand times more than the lowest paid workers. You messaged me and said let’s chat remuneration and shareholder votes around that. My understanding is that remuneration of executives starts at board level with a remuneration committee who will decide pay and bonuses for board members. Is that where it all starts before it gets down to the shareholders’ votes?
STEVEN BEATTIE: Good morning, Simon. Thanks for inviting me back on the show. If we need to distinguish between your non-executive remuneration and your executive remuneration, for non-executives the shareholders do need to approve their remuneration by way of a special resolution. There’s no similar requirement for executive remuneration. So in terms of the King reports and JSE listing requirements, which require listed companies to follow the King reports, for executive remuneration they do need to put a non-binding advisory vote to shareholders.
Also, if there are 25% or more of shareholders who vote against the remuneration report, then the company needs to engage with shareholders.
But yes, you are quite correct. There are remuneration committees as well which would look at market-related remuneration and put forward such approvals to the board of directors.
SIMON BROWN: And that vote is important because, as you say, for the executive directors it does go to shareholders and shareholders do get to vote. And we’ve seen scenarios where essentially it has been voted down, but it is just an advisory vote so it’s not binding. The company then only has to engage, and shareholders in essence are left maybe a little bit powerless in that process.
STEVEN BEATTIE: Ah, absolutely. Good point, Simon. I would say South Africa follows a bit of a soft approach because, as you say, it’s non-binding. If we compare it to the UK, for example, directors’ remuneration reports must be tabled every three years – and that’s for a binding shareholders’ vote. At AGMs, for example, I’ve been one of the few people to actually question this remuneration, and most of the time I get the same sort of responses from companies.
SIMON BROWN: And that response I imagine is that they’ve benchmarked it on the sector and the industry and the like, and it’s all fair and above board.
STEVEN BEATTIE: That’s right. They always basically tell me that it’s benchmarked. Yes, it compares with other companies. Also, they need to pay these what I consider exorbitant remuneration levels to attract talent.
Now, Simon, certainly I would be the first to acknowledge that the average CEO has special skills, abilities, knowledge, experience, etc, which the average person doesn’t have. I acknowledge that. But, like you said, Shoprite paying over the thousand times what the lowest-paid worker gets – not to bang on Shoprite’s drum, because this is also an international trend – I was also looking at the remuneration report of Prosus yesterday and I see that Bob van Dijk, for example, for the 2023 financial year [earned] €5 472 000, which at the exchange rate that I worked on yesterday is over R110 million.
SIMON BROWN: That seems like a giant amount of money, especially in that case, because really all he has to do is keep the Tencent shares warm.
A quick last one that you mentioned upfront. So for non-executive directors there is a vote there; is that a binding vote at an AGM?
STEVEN BEATTIE: Absolutely, that’s by special resolution. So for the non-executive directors the company must put that vote to shareholders via a special resolution. And a special resolution of course requires at least 75% of the votes to vote in favour of that for the resolution to be passed.
SIMON BROWN: Okay. That would normally just be because they’re non-execs. However, that’s just for attending board meetings and committee meetings and the like. It can be chunky, but it’s not going to be a R100 million-plus.
STEVEN BEATTIE: Correct. That’s governed by Section 66 of the Companies Act. So the Companies Act actually requires that special resolution.
SIMON BROWN: We’ll leave that there. Steven Beattie from Steven Beattie Tuition, I appreciate the early morning insights around executive remuneration.
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