Pressure on Discovery’s pay policy after AGM vote
The company says it will consider the opposition to its remuneration policy by almost a quarter of shareholders
Investors holding nearly a quarter of the shares represented at Discovery’s annual general meeting this week voted against its remuneration policy, apparently because it is impossible to understand and therefore difficult to assess in fairness.
About 75% of Discovery’s share capital was represented at the meeting, with 23.35% voting against the approval of the group’s remuneration policy.
This is not insignificant, considering that Rand Merchant Investments holds a 25% stake in Discovery and presumably would not have voted against the policy, although Business Day could not confirm this. Discovery CEO Adrian Gore holds about 7% of the company.
Shareholder votes on pay are not binding in SA, but the King IV Code on corporate governance and the JSE’s listings requirements oblige companies to engage with dissenting shareholders where 25% of voting rights have countered pay policies. Companies are then to report on the engagement.
Transparent remuneration policies are increasingly important to shareholders seeking to ensure alignment between the performance of top management and their pay packages.
"We are pleased the nonbinding advisory vote passed the required 75%, but we consider the views of all shareholders and we are working to enhance levels of disclosure on areas such as performance measures as required by King IV," said Discovery finance chief Deon Viljoen.
"We consider Discovery’s remuneration policy to be well-suited to our high-performance culture. We will continue to engage our shareholders."
Despite not breaching the 25% threshold, it was wise for Discovery to engage with shareholders and understand their concerns, said Ansie Ramalho, an independent corporate governance expert and former project lead on King IV. The purpose of King IV was to encourage engagement — not competition — between remuneration committees and shareholders.
While the remuneration of Discovery’s executives is in line with peers, Business Day understands there are transparency concerns. Despite the concerns, however, asset managers would not divulge details.
We consider Discovery’s remuneration policy to be well-suited to our high-performance culture. We will continue to engage our shareholders
Executives running UK subsidiaries were remunerated generously in rand terms, but management was, in aggregate, well-aligned with shareholders, said Paul Bosman, a fund manager at PSG Asset Management, which counts Discovery as a top-10 holding in a number of its equity funds.
Herschel Mayers and Neville Koopowitz, respective CEOs of VitalityLife and VitalityHealth in the UK, earned R44.3m and R33.9m in 2017.
For the year to June, Gore earned R17.2m, relative to Sanlam CEO Ian Kirk’s R22.5m and former Liberty CEO Thabo Dloti’s R19.3m for the 2016 year.
London-based Old Mutual CEO Bruce Hemphill was paid £2.4m for the same period.