Shareholder happy with Adcock’s reply, as new act intends

Ann Crotty

Pharmaceutical group Adcock Ingram could teach Eskom lessons about communication, shareholder activist Chris Logan told Business Report.

He said it was unfortunate for South African electricity consumers that Eskom was not subjected to the same reporting rigours as listed companies.

Logan submitted a series of questions to Adcock just days before its recent annual general meeting (AGM), which were aimed at getting clarification on issues that had held back the group’s profit performance in financial 2012.

“A key part of the questions were aimed at getting clarification behind the sharp increase in the company’s costs. I had asked Eskom similar questions several months ago,” Logan said. “Adcock provided me with an excellent analysis of the situation within a few days, but with Eskom I have had to resort to Promotion of Access to Information Act applications and even then it takes months.”

Logan received an explanation for the 23 percent hike in the salary bill, as well as details behind the group’s incentive scheme and confirmation that no financial targets were met for two consecutive years.

He also learnt that for every 10 percent decline in the rand, Adcock’s direct costs increased by R80 million and indirect costs increased by a further R50m to R80m. The company’s highest currency exposure is to the dollar and then the euro and Swedish krona.

Logan said he was now a happy Adcock shareholder, but remained a very unhappy electricity consumer.

While he believes that Adcock would have been prompt in its response, he contends that the new Companies Act has significantly helped individual shareholders who do not have the resources and authority available to institutional shareholders.

Contemporary Company Law by Farouk Cassim, Maleka Cassim, Rehana Cassim, Richard Jooste, Joanne Shev and Jacqueline Yeats states that the AGM is a key mechanism for promoting transparency and accountability in the management of the company’s affairs.

“The shareholders are also able to raise any matters of their own at the AGM, without having to give advance notice to the company of these matters… It would seem that even a single shareholder may raise a matter of his or her own at the AGM without providing advance notice to the company, and without having to give the board of directors an opportunity to prepare a response to such matter. This illustrates the wide powers given to shareholders at the AGM.”

However, as the authors point out, the objects of the act are not always achieved because many shareholders do not attend AGMs. In the case of Adcock’s AGM, Logan was asked to attend telephonically in order to make the necessary quorum.

All of the resolutions put to the meeting were passed. However, special resolution number one, which sought shareholder sanction for the non-executive remuneration, was withdrawn ahead of the meeting, indicating that shareholders through their proxy voting had indicated there would not be sufficient support.