EOH shareholders vote against salary policies
EOH shareholders voted against the endorsement of the remuneration policy and the remuneration implementation report, with 65.36percent of the shareholders voting against the resolutions. The group needed at least 75percent of its shareholders to support the resolutions.
The two resolutions were also a point of contention in Old Mutual’s and Absa Group’s AGMs earlier this year.
Peter Takaendesa, a head of equities at Mergence Investment Managers, said EOH has recently changed some elements of its remuneration policy, particularly the long-term incentive scheme where the previous share option schemes have been replaced with a share ownership plan (SOP).
“The SOP has some attractive elements that limit dilution to existing shareholders such as the commitment to settle SOP awards with shares purchased in the market on vesting instead of issuing new shares. This is particularly relevant at this stage as the share price has sharply declined over the past few years,” Takaendesa said.
He said the SOP was also linked to value creation for shareholders, as performance conditions were linked to critical company value drivers, such as earnings growth, return on capital, cash flow, and other measures of sustainability.
“We believe the strong opposition to the two remuneration-related resolutions is likely linked to the outcomes and implementation of the migration from the old schemes to the new scheme.
“The new executives also came with large sign-on guaranteed bonuses, which may have affected how suffering shareholders have reacted to the resolutions at AGM.
“It is always very difficult to change remuneration policy and balance stakeholder interests when company performance has been as bad as it got at EOH,” he said.
EOH said on Friday that it has started reaching out to the shareholders who voted against the resolutions.
“In respect of the non-binding advisory votes on the endorsement of the remuneration policy and the endorsement of the remuneration implementation report, EOH has already commenced engagement with the dissenting shareholders who have reached out to the company to share their concerns on both the remuneration policy and remuneration implementation report and will continue to do so,” the group said.
The group has also extended an invitation to all shareholders who have not yet engaged with the company in order to address their concerns by contacting Ismail Mamooje, the chairperson of the nomination and remuneration committee.
“EOH will consider all concerns and take steps to address legitimate and reasonable objections and concerns,” the group said.
Jordan Weir, a trader at Citadel, said management at EOH need to start leading from the front and prove their ability to run an honest and trustworthy business going forward.
“It is not as simple as just flipping a switch. Once you lose shareholder trust, it will and should take many years to regain that through honest and clean business ethics. EOH still has a way to go, before that trust is rebuilt,” Weir said.
EOH shares closed 0.79percent higher at R12.82 on the JSE on Friday.