THE BOTTOM LINE
What price embarrassment when it speaks the truth?
Investec Securities report could be the elephant in the room when it comes to questions about executive pay
Investec’s decision to muzzle its securities arm came as a disappointment to some in the market. When Investec Securities said in a report it was time for Tongaat Hulett’s longstanding CEO, Peter Staude, to step aside, many in the investment community applauded the rare showing of activism in South Africa’s investment community.
But Investec distanced itself from the report and apologised for the “embarrassment” it had caused Staude.On the one hand, the move is understandable since the group has close ties to Tongaat. It is a major shareholder and acts as the sugar producer’s sponsor on the JSE, among other interests.
But on the other hand, it is concerning that stock researchers are expected to toe the line in their assessments of listed companies. It seems wrong that research houses are only able to speak freely about stocks if their parent companies have no corporate ties.
And it is not outrageous to assert that a shake-up is needed at Tongaat, whose shares are trading at nine-year lows. Yes, the sugar industry has been tough – local producers have been battling against heavily subsidised imports and other difficulties. But that is probably the best time to bring in new blood and fresh ideas.
Staude will only retire in April next year, according to a report by Business Times over the weekend. In other words, expect some probing questions at Tongaat’s annual general meeting in August if Staude is still CEO.
The Investec Securities report could be the elephant in the room, and other investors – including Old Mutual – plan to raise questions about executive pay.