It’s hard to imagine a similar system working in any other sphere of life; players being awarded hugely generous packages for a performance about which no one, but a few insiders, has the details. In fact the only reason it works in this instance is because the system is entirely closed and comprises only insiders. Well, perhaps not entirely closed.
Theo Botha, the shareholder activist, has managed to prise open a position from which he can observe the machinations of the corporate community. Botha is virtually alone in his efforts to shine some uncompromising light on the senior ranks of that community and hold those executives to account.
The millions of savers and members of pension funds across the country owe Botha a huge debt of gratitude; he serves them considerably better than all of the enormously well-paid layers of advisers that lie between them and their JSE investments.
The system under discussion is of course the one underpinning the awarding of remuneration to executives and directors of our listed companies.
Yesterday, at the Barloworld annual general meeting, Botha pointed out a fundamental flaw in the screeds of self-serving verbiage that so often passes for remuneration policies: outsiders, such as shareholders, are not given the necessary information to determine how robust the executives’ performances have been.
For the insiders this is not a problem because they trust the several layers of well-paid advisers who assure them that “everything is market-related”.
But do our corporate leaders not realise that in South Africa, just as almost everywhere else in the world, there is little inclination to trust the corporate sector or to believe that what is generated by “the market” serves us all. In future remuneration committees are going to have to give the outsiders all the information they need to determine just how appropriate these generous packages are.
Umthombo Resources
It is a sad day when comrades in business fall out and start trading insults with each other. Such is the case involving Umthombo Resources and its directors, Matodzi Nesongozwi and Vuslat Bayoglu.
First, it does seem that Bayoglu has the unfortunate history of falling out with partners. In an affidavit he deposed in order to freeze the bank accounts of Nesongozwi and his companies, he says he was involved in a company called Sumo Coal.
In the affidavit, Bayoglu says that during 2008 he and Sumo had some fallout that resulted in him resigning from Sumo and its subsidiaries.
But he adds: “The reasons and circumstances of the fallout are not relevant to the current application. However, it is worth mentioning that the first respondent’s (Nesongozwi’s) lack of business acumen and ill discipline were some of the contributory factors thereto.
“Such distasteful behaviour was manifested in the childlike and unreasonable demands that the first respondent would make, which did not advance the business interests of the fifth respondent (Umthombo).”
Nesongozwi does not pull punches either, saying that on more than one occasion he has been physically prevented by Bayoglu and his security personnel from accessing his office.
He says he and his attorney have been intimidated when they have attempted to access Umthombo Resources’ offices.
Nesongozwi says in one affidavit: “Bayoglu is aided and abetted by his henchman, Tarik Imre, who acts as the ‘manager’. Imre is under the control of Bayoglu. Imre has been arrested by the SAPS and Bayoglu and Imre have been questioned by the SA Reserve Bank.”
Nesongozwi wants to enforce a settlement agreement between his Nesongozwi Mining Corporation (NMC) and Bayoglu’s Kalyana Resources, signed last year, in which NMC will sell all its shares in Umthombo to Kalyana for R150 million and other prospecting rights. He says this is because he has received death threats.
Sharemax
One of the ironies of the Sharemax scheme of arrangement, which has just been sanctioned by the North Gauteng High Court, is that it appears creditors and shareholders are footing the bill for the costs of a scheme that will compromise their rights and result in them getting little, if any, of the capital back that they invested.
Many might shake their heads in amazement at how it was possible for the new board of the Sharemax group of companies to achieve this. In fact, it was achieved quite easily by severely restricting the free flow of information about the company’s affairs.
Sharemax’s board allowed only creditors and shareholders plus their financial advisers access to the circular about the scheme of arrangement. This meant the investors got advice about the scheme of arrangement from the same brokers who advised them to invest in Sharemax in the first instance. This obviously involves a serious conflict of interests for brokers.
The scheme of arrangement does not mean these brokers are off the hook. Complaints can still be made to the Financial Advisory and Intermediary Services Ombud. There is evidence that brokers who sold investors into Sharemax schemes were largely interested in the substantial commission they could earn from securing investments in Sharemax.
Many of the brokers are believed to have failed to investigate the financial soundness and liquidity of Sharemax as an investment option or consider alternative investments for their clients. This obviously places a serious question mark over the appropriateness of the advice provided by these brokers.
Edited by Peter DeIonno. With contributions by Ann Crotty, Wiseman Khuzwayo and Roy Cokayne.