Koos Bekker. Picture: FINANCIAL MAIL
Koos Bekker. Picture: FINANCIAL MAIL

Attempts to delve more deeply into the contentious executive remuneration policy at technology giant Naspers were unceremoniously halted by chairman Koos Bekker at an AGM in Cape Town on Friday.

Bekker abruptly closed the meeting to further questions even though shareholder activist Theo Botha was indicating he had more queries about executive pay.

Media reports billed the AGM as a showdown on corporate pay between concerned shareholders - including influential fund manager Allan Gray - and Bekker, who was largely responsible for creating huge value by transforming the media company into a diversified technology conglomerate.

Botha vainly protested that the meeting was the only chance shareholders had to engage with the company's executives. But Bekker - who reiterated his right as chairman to determine the meeting's proceedings - pointed out that shareholders were welcome to engage with executives after the AGM. "I've ruled. That's the end of it."

Speaking after the AGM, Botha said the decision to shut down question time prejudiced shareholders' rights.

"Are asset owners and managers going to sit up and take notice now?"

The nub of the remuneration issue is that a good deal of Naspers' stock market fortune and operational success in recent years has been linked to its 34% stake in Chinese internet giant Tencent.

If Tencent is stripped out of the equation, Naspers - which holds investments and operations in e-commerce, video services and media - traded deeply in the red in its last financial year. The market puts scant value on Naspers businesses outside of Tencent.

Since Tencent is regarded as a strategic investment rather than an operational appendage, Naspers' remuneration committee has taken flak for what has been perceived as a skewed remuneration award to CEO Bob van Dijk. This involves a long-term incentive award with a fair value of $10.4-million in financial 2017, which is over and above Van Dijk's $2.2-million annual salary.

In the financial year to end-March 2017, Van Dijk also received 284031 Naspers N shares as part of a previous remuneration package. These shares hold a market value of more than R850-million.

After being pressed by Botha, non-executive director Rachel Jafta - who earlier said executive remuneration was not linked to the performance of Tencent - disclosed that Van Dijk's remuneration was aligned to Naspers' cash flow and headline earnings targets.

Jafta indicated that Naspers would give consideration to more disclosure around remuneration in the 2018 annual report. She said more specific detail might be disclosed "without letting go of company secrets".

Almost 18.5% of shareholders voted against the non-binding resolution to approve the company's remuneration policy.

Bekker explained that Van Dijk's remuneration was linked to both the performance of Naspers as a whole and the progress of the e-commerce segments. He said the specific objectives of the e-commerce strategy could not be revealed. "We need to shut up about this. This information is valuable."

Sentinel Retirement Fund analyst Mehluli Mncube said if the bulk of the remuneration was not being driven by the investment in Tencent, it was important to understand where Naspers was going strategically. "Is it a media company, or an investment company that is allocating capital? Is the CEO actively involved in Tencent, or is it a passive investment?"

We think Tencent is the best application of our capital at the moment.
Koos Bekker

Bekker aired strong views on corporate governance. "There's a lot of emphasis on corporate governance, which sounds wonderful. If you want to build the best soccer team in the world, you need the best players. You need to be merciless, otherwise you will lose. If you are losing then the best corporate governance in the world won't help."

Bekker dismissed suggestions that Naspers should sell its shares in Tencent. He said had Naspers sold its Tencent stake five years ago, it would have received Hong Kong $45 per share compared with the current share price of HK$345. "Hopefully there will be further growth. We think Tencent is the best application of our capital at the moment."

Bekker also defended Naspers' technology conglomerate structure, noting that Silicon Valley's big five - Amazon, Apple, Facebook, Microsoft and Google - continued to outgrow the market. "The big guys grow faster than the little guys. It's very dangerous to be the lonely guy competing against the big guys. It's useful to be big and composite."

He said if Naspers had broken up into its operating parts five years ago it would have realised $77 a share in cash compared to the share price of $220 (about R3000).

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