Shareholder activists are turning up the governance and pay heat in South Africa.
Brian Molefe, CEO of the Public Investment Commission, the organisation that administers public service pension funds and by far the largest investor on the South African Stock Exchange, has formally stepped up the commission’s shareholder activism to effect transformation at board level in South Africa’s largest companies.
Over the past two years Molefe has tried to engage quietly with a number of companies on the issue of board transformation. In fact it was quietly at first and then increasingly publicly, leading to a showdown with Sasol and Nedbank, both of whom have since recruited Africans to their boards.
In January, Molefe publicly challenged South Africa’s major industrial company Barlowworld – where PIC holds an equity stake of 15% – over its lily-white board. At the AGM, the Barlowworld chairman stepped down and the company appointed its first black executive director.
The Barlowworld episode signalled a phase of renewed shareholder activism for the PIC, which continued last week when it questioned one of the country’s big retailers – JD Group – over its lack of transformation. On 12 February, Molefe, speaking at a conference on executive pay, turned his sights on some of South Africa’s top financial institutions – Standard Bank, FirstRand and Old Mutual plc – for the same reason.
As a major shareholder in all of these financial institutions, Molefe announced that the PIC had compiled a shareholder policy document which would be released in the new few weeks and which would set the tone for its continued engagement with SA’s corporate sector
On the issue of executive pay he complained that among the top 20 companies, 92 executives were paid almost 1bn rand. If the public telecommunications company Telkom and private cellphone giant MTN were excluded from this then of the 82 executives remaining only four were African.
“The problem with black executive remuneration is white executive remuneration. There is black talent. I think we are under-utilising it,” Molefe said.
Controlling major shareholdings in virtually every major South African listed company (including the nearly 20 dual-listed companies also listed on the London Stock Exchange), Molefe has the power to do something about it.
Sub-Saharan Africa writer