Heat is on Coronation to justify fat exec bonuses
Despite fund manager losing R9bn on its Steinhoff bets
Shareholder activist Theo Botha is insisting Coronation Fund Managers disclose details about the awarding of R604.5-million in bonuses to its employees ahead of its annual general meeting next week.
While the bonus, equivalent to 30% of pre-tax profit, is distributed among all the employees Botha says a handful of executives get the lion’s share. He said it was unacceptable that the identity of these key individuals was not disclosed. Executive directors Anton Pillay and John Snalam are the only two executives whose remuneration is disclosed.
Botha said the lack of transparency was particularly inappropriate given Coronation’s role in monitoring corporate governance adherence at companies in its portfolio. He has again called on shareholders to vote against the remuneration policy.Last year was the first time the policy was put to a shareholder vote, which in terms of the King Code is non-binding. Just over 15% of shareholders voted against the policy with the Public Investment Corporation’s 9.53% accounting for over half of that vote. The PIC said it voted against the remuneration policy last year because it was inconsistent with best practice and lacked disclosure of key performance indicators, targets and weightings. The policy does include key performance indicators this year.
One institutional shareholder said he had voted in favour of the policy because he believed the 30% bonus pool represented less than other major players in the fund management industry, such as Investec and Stanlib, paid their staff.
“In this industry staff costs inevitably represent a large and growing percentage of total costs and can whittle away shareholder returns. Coronation seems to have a better handle on this very prickly issue.”Until the 2017 annual general meeting Coronation did not put the policy to a vote on the grounds that the bonus payment had been established 23 years ago and represented a contract between the company and its employees. Details of the policy had been included in Coronation’s pre-listing statement when it listed in 2003 and had been implicitly approved by shareholders at that stage.
The latest remuneration report, which was signed off on December 29, makes no mention of the collapse of Steinhoff in which Coronation was heavily invested. The collapse in the share price, which cost Coronation R9-billion, occurred after its September year-end. It is unclear if there is any provision for clawing back previous bonus payments.
In early January Coronation’s chief investment officer Karl Leinberger wrote a seven-page letter to the company’s stakeholders providing a chronology of events and describing Coronation’s investment case. He acknowledged Coronation had got it wrong but, in a sentence that suggests there might not be much bonus clawback, added: “The failure of the board and the company’s independent auditors to identify what is at least two years of misstated financial statements is frustrating. It is mystifying that so many smart insiders, who by definition had better information than outsiders, were so heavily invested in the company and so blindsided by recent events.”