Ann Crotty
Shareholder activist Theo Botha has lambasted Barloworld for not providing shareholders with the information necessary to determine whether the remuneration paid to its executives is appropriate or excessive.
He has also criticised the 80 percent of Barloworld shareholders who voted in support of the remuneration policy despite not having the necessary information.
Botha, who attended Barloworld’s annual general meeting in Sandton yesterday, acknowledged that the diversified automotive group provided considerable information about its remuneration policy, but added: “Their disclosure runs to 12 pages and nowhere does it tell me what the actual target is… they have impressive-looking metrics, and talk about ‘threshold, target and stretch’, but they do not tell me what percentage increase in operating profit or return on equity an executive had to achieve to reach the threshold or the stretch target.”
Botha said this made it impossible for him to determine whether or not the performance targets were robust.
“Despite all the additional information it is impossible for shareholders to hold the remuneration committee to account,” Botha said.
He said there was no way of knowing whether the targets were set to ensure executives received bonuses for pedestrian performances or did actually incentivise outstanding efforts.
He noted that the remuneration report stated that “targets (are) aimed at increasing shareholder value” and urged the company to reveal the necessary information for shareholders to decide how accurate that statement was.
For financial year 2011 group chief executive Clive Thompson received a bonus of R7.9 million, taking his total package for the year to R15m.
While the group reported a very strong performance in 2011, Botha noted that in the previous four years Thompson was also awarded generous bonuses despite significant declines in earnings.
He said in this context it was impossible for the shareholders to decide on the fairness or reasonableness of the company’s remuneration policy.
In a written response to questions, Thompson said that with the new King 3 non-binding advisory vote on remuneration policies, Barloworld had significantly increased its level of disclosure and transparency on performance metrics.
“The performance targets are set annually following our strategic plan and the remuneration committee, in conjunction with independent advisers, approves threshold, target and outperformance levels of financial performance,” he said.
“The targets are intended to be challenging but fair in the context of the current business environment. In setting the remuneration policy, the remuneration committee is assisted by external specialist advisers and considers feedback from shareholders on the policy and its disclosure.”
The Government Employees Pension Fund, the largest shareholder in Barloworld with a beneficial holding of 14.72 percent, was unable to comment yesterday but undertook to respond today. The Public Investment Corporation, which manages the fund, voted against the remuneration policy. Barloworld shares leapt 6.71 percent to R85.90. Business Watch, page 18