Steinhoff Africa Retail shareholders forced to pick up the bill for managers’ perks
Here is a surefire way to infuriate your shareholders. In 2011, two companies linked to South African billionaire Christo Wiese offered top managers an option to buy shares in the businesses they were running. Plenty of companies do that, but not necessarily with this additional sweetener: The executives in question received bank loans to buy the stock — loans that were guaranteed by the company in the event they could not be repaid. Clothing retailer Pepkor Holdings, now part of Steinhoff Africa Retail (Star), and investment company Brait clearly saw the perk as a straightforward way of keeping top brass focused on their jobs. What they did not bargain for is their mutual downturn in fortunes, erasing the benefit for managers of having the shares, and now both companies risk having to shell out to settle their managers’ bad debts. "At the time we looked at various schemes and arrangements for management incentives and those were the best schemes we could come up with," said Wiese, ...
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