JOHANNESBURG - Packaging manufacturer Nampak’s remuneration policy was taken to task by shareholders at the group annual meeting last Thursday, with shareholders blocking windfall payments to the company’s executives.
The company had planned a R7.2million cash retention award to chief executive André de Ruyter and a further R4.8m to chief financial officer Glenn Fullerton.
Peter Surgey, chairperson of Nampak’s remuneration committee, said it faced a reality of significant retention risk of its chief executive and chief financial officer, due to an earnings impact from foreign earnings repatriation issues.
“After discussions with certain shareholders, the committee determined that it was in the best interest of Nampak to make 'once-off' cash retention awards to the chief executive, chief financial officer and group executive.
“The decision was supported by a view of both executives' performances and contributions in the prior year, in which financial incentives targets were not achieved,” Surgey said.
De Ruyter joined Nampak from petrochemicals giant Sasol in April 2014. Fullerton, a former chief executive of MB Technologies, was appointed Nampak’s chief financial officer in 2015.
The “once-off” retention awards were a deviation from the group’s current policy.
This was, however, met with resistance from shareholders with more than 25percent vetoing the policy, thus blocking it.
The King III Report on Corporate Governance, in Principle 2.27, states that: “Every year, the company’s remuneration policy should be tabled to shareholders for a non-binding advisory vote at the annual general meeting. This vote enables shareholders to express their views on the remuneration policies adopted and on their implementation.”
The vote tally for the remuneration policy saw 62.5percent of shareholders voting for the policy, while 37.5voted against it, meaning it did not meet the 75percent threshold for it to carry. Mervyn King, chairperson of the King Committee, has previously said a vote by 75percent of shareholders against a remuneration policy should trigger “certain consequences”.
Theo Botha, a shareholder activist said he viewed the retention awards planned for De Ruyter and Fullerton as back-dated bonuses and some shareholders were not taken into confidence before the committee arrived at the decision.
“What Nampak is trying to do is to backdate the retention bonus to 2016 and their policy doesn’t allow that. It is a backdated bonus with limited disclosure. Now more than 30percent of shareholders are not happy and that’s what happens when companies don’t treat shareholders equally and met other shareholders behind closed doors while the rest are not in the loop,” Botha said.
He also took issue with De Ruyter having earned R74million in four years, while no dividends had been declared in two years.
Nampak’s share price has tanked 64.83percent in the past three years, valuing the company at R10.3billion. The group released its full-year ended September results in November, which showed a 15percent rise in earnings and a three percent increase in trading profit.
The packaging group was also hit by a strong rand, which resulted in a 2percent decline in revenue. Nampak declared no dividend as it stuck to its strategy to improve its financial position and conserve cash.
PwC, in its 11th edition of the Non-executive Directors: Practices and Fees Trends Report released last week, said shareholder activism should be seen as constructive criticism fundamental to improving a remuneration framework.