In the cover note to his proxy voting recommendation for Naspers’ latest AGM, Activo Shareholder, a nonprofit company that helps socially responsible investors exercise their rights as a company, describes the president’s statement that the company is “committed to high standards of corporate governance” as problematic.
The problem for the active shareholder is the control structure. A mere 0.22% of Naspers’ total shares (A shares) have 1,000 votes each and thus represent 68.8% of total votes.
In 2020, this meant that six resolutions were passed despite significant opposition from holders of N ordinary shares.
Surprisingly, a special resolution was passed despite opposition from 88% of shareholders.
“Despite this extraordinary level of opposition, the board continues to present the same resolutions every year; it is very difficult to understand the president’s statement in light of this, ”said Active Shareholder.
At the 2021 General Shareholders’ Meeting (Wednesday) the same resolutions were presented with largely the same high level of opposition from ordinary shareholders.
The offending special resolution, to place the non-issued shares under the control of the directors, was rejected by 86% of shareholders this year.
All the agreements were approved thanks to the support of 100% of the shareholders A.
Ownership of the A shares is conferred by a complex and opaque structure that includes three key entities: Nasbel, Wheatfields and Keeromstraat. In turn, it appears that control of these three entities rests, to a large extent, with Naspers chairman Koos Bekker, Naspers director Cobus Stofberg, and Sanlam.
A Sanlam spokesperson confirmed to Moneyweb that Sanlam Capital owns an equity stake in Wheatfields, with underlying stakes in Naspers A shares directly or through Keeromstraat and Nasbel.
Confidential Agreement …
“Wheatfields has a confidential shareholder agreement, which governs the shareholder relationship between Wheatfields shareholders; this participation is managed on behalf of Sanlam Capital by Sanlam Investments, ”said the spokesperson.
He added that when Sanlam Investments votes on the decisions Wheatfields will make, the merits of the investment are considered along with input from Sanlam Investments’ corporate governance unit.
The support of 100% of shareholders A in each resolution suggests that Sanlam supported all of them, including the two resolutions related to remuneration.
On this he disagrees with the majority of Naspers investors, which includes most of the large South African institutions, given that only 34% of ordinary shareholders voted in favor of the remuneration-related resolutions.
Active Shareholder’s Mike Martin said that Sanlam is not only protecting Naspers’ extremely unpopular compensation policy, but also allowing Naspers’s board to ignore its ordinary shareholders.
‘No conflict,’ says Sanlam
Sanlam Investments is satisfied that there are no conflicts of interest that influence its voting decisions; it does not currently manage assets on behalf of the Naspers Group.
“Sanlam Investments makes decisions based solely on investment merits and good governance and the Sanlam Group is fully satisfied that there are no conflicts of interest associated with the way Sanlam Investments has voted in this case,” the spokesperson told Moneyweb .
Nasbel’s considerable influence on Naspers also raises questions about the independence of three directors on Naspers’ board labeled as independent: Rachel Jafta, Ben van der Ross and Debra Meyer.
“It is incomprehensible that these directors can be called independent when they serve on the controlling shareholder’s board,” Martin said.
There is the added fact that Van der Ross has been on the board of Naspers for 22 years and Jafta for 18.
At Wednesday’s General Shareholders’ Meeting, Jafta, who chairs the group’s nominating committee, assured at the meeting that the board of directors “had rigorous processes in place to manage actual or potential conflicts of interest should they arise.”
She was answering questions about potential conflicts of interest that Naspers’ lead independent director, Hendrik du Toit, could have as a result of his position as CEO of asset manager Ninety One, which is invested in Naspers.
“The nominating committee and the board regularly review the independence of our directors,” Jafta said, adding that they had no concerns regarding the lead independent director.
With control of Naspers in the hands of shareholders A, there is little hope that the compensation committee will respond to sustained criticism from ordinary shareholders about inappropriate and excessive levels of executive compensation.
Light on the horizon?
However, a question at Wednesday’s AGM from the nonprofit shareholder activism organization Just Share raises the specter of a much more effective source of restraint, namely the Chinese government.
The Chinese government’s recent aggressive regulatory approach to its powerful and wealthy tech companies has been motivated, in part, by a desire to “crack down” on wealth inequality and executive overpayment.
President Xi Jinping has recently placed considerable emphasis on the country ensuring moderate wealth for everyone and not just a few. The measures envisaged for its “common prosperity program” include curbing “excessive” incomes and encouraging the rich to give more back to society.
Just Share told the General Shareholders’ Meeting that Tencent’s quick response has been to set aside $ 7.7 billion – subsequently increased to $ 15 billion (R223.5 billion) – for its own “common prosperity program.”
Just Share wanted to know, given Naspers ‘record salary levels, whether Naspers’ compensation committee would consider the new stricter approach of the Chinese government in future deliberations.
All entries ‘considered’ says Naspers Remco
Compensation committee chairman Craig Enenstein responded: “We take a wide range of input to think about the entire compensation structure, the way we design our incentives, the way we think about our metrics to make sure we we are creating relevant information and challenging management obligations to ultimately drive shareholder value and link it and create alignment and transparency for you, the shareholder. We will continue to consider all contributions. ”
“I’m not sure if that was a ‘yes’ or a ‘no,'” Martin said after the meeting, describing the compensation committee as outdated and disconnected.
The Chinese government’s common prosperity program might be the only hope ordinary shareholders have for some restraint on the Naspers pay front.