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ArcelorMittal shows it is out of touch with investors

Published May 30, 2013

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It must be difficult being a shareholder of ArcelorMittal SA these days, or years. The profit trajectory just does not seem likely to ever come right. Indeed it’s all a bit reminiscent of mid-1990s Iscor when people began to believe we’d seen the end of the steel industry across the globe. But then along came China and the Mittals.

For years the Mittals made an absolute fortune out of Iscor, as did the shareholders who were lucky enough to get carried along in the China-fuelled demand for steel. But for now, that must seem just a distant memory.

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And uncomfortable as it must be to be a shareholder, consider what it is like to be someone living near an ArcelorMittal plant. Of course the company’s shareholders and neighbours are related in a way, although you wouldn’t know it from reading the Integrated Report. They are related through the environment.

In terms of almost everything we are told about the importance of sustainability and protecting the environment, ArcMittal should be ensuring that the environment in which it is operating is not a source of threat to its neighbours. By most accounts it fails miserably to do this. And instead of engaging the shareholders on this high profile issue, it just chose to ignore it.

It’s unlikely that this was the reason shareholders voted against the special resolution authorising the increase in the chairman’s fees and forced the company to withdraw it. More likely was that the long-suffering shareholders were just gatvol with all that seems to be going wrong.

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For them approving an increase in fees for the new chairman from R800 000 to R1.8 million was probably just too much.

That ArcelorMittal thought they could swing it, before shareholders had any sign that things were improving, suggests it is as out of touch with its shareholders as it is with its neighbours.

MTN

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One MTN shareholder was determined to give chairman Cyril Ramaphosa an unusual send-off at the company’s annual general meeting (AGM) on Tuesday.

Working through the resolutions that shareholders were to vote on, Ramaphosa – who has been the chairman for the past 11 years – was interrupted by a representative of Eskom’s pension scheme just as he was asking shareholders to consider the ninth ordinary resolution, namely the re-election of Jeff van Rooyen as a member of the audit committee.

The next resolution was to re-elect Johnson Njeke to the audit committee.

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The shareholder demanded to know what considerations the board made prior to nominating directors because it seemed some of the directors, including Njeke, were overburdened with directorships elsewhere.

Singling out Njeke, who was appointed to the board on June 13, 2006, the shareholder – citing MTN’s annual report – noted that Njeke had attended three out of four scheduled board meetings during the past financial year. And as a member of the risk, compliance and corporate governance committee, he had missed two out of five meetings and Njeke was not even present at the AGM.

Ramaphosa replied that Njeke had requested permission to attend something special elsewhere and reassured the shareholder that directors paid attention to their MTN responsibilities.

As he was about to tackle a special resolution on the remuneration policy, the same shareholder asked why the key performance indicators for executives expressed in the annual report had ticks next to them and not the supporting weighting.

“So it falls short in terms of allowing shareholders to link the performance to the huge salaries the executives are getting,” the shareholder stated.

Surprisingly, none of the shareholders questioned the corporate governance soundness of Phuthuma Nhleko’s reappointment as MTN chairman or whether there was more to the appointment than meets the eye.

Brands

As South African food retailers work on refining their own private label brands, they must be careful not to copy similar designs of existing brands.

This warning by a senior associate at ENS (Edward Nathan Sonnenbergs), Rachel Sikwane, comes as UK food producers and supermarkets are at war over similar product designs.

Sikwane says although this kind of practice was less common in South Africa, retailers and food manufacturers must learn of the legal issues involved. In South Africa, for example, supermarkets such as Shoprite and Pick n Pay have distinctively used colour accompanied by simple lettering on their private label products.

Pick n Pay has over the years used a blue and white No Name label, so has Checkers, which uses the Housebrand label for its products. Sikwane says if the owner of the established brand is unhappy with the supermarket’s own-label product, it might sue for passing off.

However, in order to succeed in a passing off case, a brand owner needs to establish that its brand has both a reputation and goodwill. The brand owner might have to also prove that the other company is using a similar brand, falsely suggesting that there is a commercial connection and thereby causing damage.

Currently in the UK, supermarket chains were using similar labelling to the extent that consumers were left confused. Examples were that of a shampoo called Herbal Essence and a major retailer Boots’ look-a-like shampoo called Fruit Essence. In both cases, the colour pink was the dominant feature.

Sikwane added that confusion between such products was inevitable because shopping was often a hurried and stressful experience. In the passing off case, however, external factors may reduce the likelihood of confusion such as the supermarkets’ trademark.

Edited by Peter DeIonno. With contributions from Ann Crotty, Asha Speckman and Nompumelelo Magwaza.

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