‘Old boys club’ draws Truworths investors’ ire
Shareholder activists are gunning for fashion retailer Truworths in a bid to force changes to its board and executive management, which, 24 years after the country’s first democratic elections, continues to be dominated by white men.
Transformation in the retail sector, which does not rely
on government for licences or for business, has lagged sectors such as mining and financial services.
With two black women on its 11-member board, of which one was appointed in February, and only two women and no blacks among its 19 divisional directors, Truworths falls short of even the low levels of transformation in the retail sector. In the mining sector, 50% of directors must be black, of which 20% must be black women.
Shares in the retail sector have been hit by weak economic conditions, which have knocked consumer spending. The general retailers index is down 18.1% since the start of 2018, lagging the all share index, which has shed 12.27%. Truworths is down nearly 14%. This has added to calls for board and management changes.
Bishop Jo Seoka, chairman of Active Shareholder, which advises nongovernmental organisations how to vote their shares, said the Truworths board was dominated by white men who had been directors for a worryingly long time.
"They seem to treat these as lifetime appointments; it’s amazing that they don’t realise that this looks like the quintessential old boys’ club."
'Lack of transformation'
Active is voting against two of the five directors who are up for re-election at the retail group’s annual general meeting on Wednesday.
It is voting against former Truworths executive Tony Taylor (71), who is described as an independent nonexecutive director, although he has served on the board for 19 years. "His reappointment is opposed on the grounds of the lack of transformation, the lack of independence and the fact that younger directors are not being introduced," said Active in its proxy statement.
It said it was also voting against recently appointed Hans Hawinkels because it believed it was not appropriate for the board to appoint another white man in his late 60s.
In his chairman’s statement, Hilton Saven, who has been on the board for 15 years and is deemed independent, described the Truworths board as "strong, well balanced and diverse in its composition, expertise and opinions."
Chief operations officer David Pfaff said the board was unaware of shareholder concerns, and that the board would "like to engage with them." He said the group was already close to its own target of 30% women and 30% black directors.
Shane Watkins, chief investment officer at All Weather Capital, said the "demographics of the board and of the executive management team is completely detached from the demographic of their core customer."
Although All Weather Capital did not hold Truworths shares, Watkins said he would attend the annual general meeting to engage with the management about the lack of transformation. Analysts from All Weather Capital, whose executive chairman John Oliphant chairs the Code for Responsible Investing in SA, are represented at most annual general meetings as part of their strategy to champion governance and empowerment issues, he said.
Active is also voting against proposed fee increases for non- executive directors.
Average director fees have increased 210% since 2008, compared with an increase in profit before tax of 108% over the same period.
Directors’ fees have also increased at a much higher rate than employee wages.