Spar Group’s upcoming AGM will be closely watched by an unusually wide array of stakeholders.
Those with financial exposure, like shareholders, employees, independent retailers and wholesalers, will want clarity on recent serious allegations — including of creative accounting and discrimination — as well as an indication that the board has a persuasive plan to address these concerning issues.
Its customers may also be looking for more reassurance than former CEO Brett Botten presented in a video on the group’s website home page that the future of this retailer is in good hands.
It is disappointing that, yet again, SA’s large, well-resourced institutional shareholders appear to have taken little action to address obvious governance concerns at a big JSE-listed company. This approach encourages the cynical view that governance is nothing more than a tick-box exercise that all too frequently ends up sheltering corporate executives and their complicit investors from responsibility.
This approach not only threatens the long-term value of investments, but understandably encourages cynicism about the value of shareholder capitalism. While engaging behind closed doors holds value, it is time our institutional investors demonstrated a willingness for more robust and transparent engagement in their role as custodians of much of the country’s wealth.
That the situation at Spar required the board’s two most senior individuals — Botten and chair Graham O’Connor — to leave lends support to allegations of broad corporate governance failure over a sustained period. Those departures should be welcomed, as should the appointment of three new directors.
The urgent circumstances for the new board members’ introduction suggest the group had done little succession planning. Mike Bosman’s appointment as executive chair (and interim CEO), albeit for a limited three-month period, is potentially problematic (but probably unavoidable in this context of inadequate planning).
This starkly demonstrates how important it is for companies not only to undertake succession planning, but to provide evidence of this — if for no other reason than to assure shareholders that neither the board, nor the company as a whole, has been captured by a few individuals.
Another critical governance issue recently highlighted is the group’s poor quality of stakeholder communication. While this has improved in recent weeks it remains unclear from any of Spar’s stock exchange news service announcements what the precise nature is of the activities requiring the departure of the chair and CEO. The only details provided relate to three “irregular” loans totalling R11m that were made five years ago.
Not only does poor-quality disclosure create an enabling environment for low accountability, it defeats the purpose of integrated reporting: to provide company stakeholders with relevant, material information to understand the business.
Worryingly, Spar’s reporting suite provides no information about the front-end, consumer-facing store workers. A detailed breakdown of store employees’ headcount by employee status (percentage of full-time, part-time and fixed-term contract workers) and the disclosure of their hourly wage would shed light on job security.
It would also enable stakeholders to assess whether executives are remunerated fairly and responsibly in the context of overall employees’ remuneration, as per the JSE listing requirements. In fact, Spar committed at its 2022 AGM to disclose the wages of its lowest-paid workers, but has not done so. Transparency about wage differentials is crucial to addressing the severe income inequality in SA’s labour markets.
In his role as executive chair of a beleaguered group, Bosman is heading into entirely new territory. While it is encouraging that Bosman has resigned from one of his directorships (AVI), he may still be over-committed to devote the time, energy and focus needed in this new position.
He remains on the Spur, MTN and EOH boards — substantial JSE-listed entities with their own challenges, each needing time and energy from all their directors to ensure effective governance oversight. Bosman is also a nonexecutive chair of Vinimark Trading, SA’s largest independent wine distribution company.
Similarly, group company secretary Kevin O’Brien holds the position of chief sustainability officer and chief ESG officer (the distinction between these roles is not entirely clear), and according to the Companies and Intellectual Property Commission is company secretary for both the Spar Guild and Build It Guild of Southern Africa. These are all demanding roles and call into question the board’s stated commitments to sustainability, ESG and the management of climate risk.
In his first public address as Spar group chair Bosman has an important opportunity at the upcoming AGM to clarify the extent of Spar’s challenges — including those that have received extensive media exposure but have not yet been openly addressed by the board.
While full disclosure might not be appropriate at this stage, it will be disappointing if Bosman fails to adequately address the issues and leaves stakeholders at the mercy of the rumours and speculation that have swept through the market in recent months.
The coming months will be vital for Spar. It should expect many stakeholders to watch the AGM closely, and whoever is appointed as the CEO will equally be under scrutiny. Institutional investors in particular should also pay attention.
• Blizzard is head of governance, and Ngogela senior inequality analyst, at Just Share.