WHAT IT MEANS: Coronation will finally reveal remuneration policy details. Move comes after long-term shareholder activism.
Fifteen years after listed companies were first required to disclose details of their executive directors’ remuneration, Coronation Fund Managers has still been providing only the bare bones. The pay of the two top executive directors and reference to the 30% of annual group pretax profit that is allocated to a bonus pool is the gist of what shareholders have been getting.
In lieu of a statement of remuneration policy, shareholders have been told "the bonus pool is utilised to incentivise and retain staff in accordance with their performance and contribution to the business".
No mention of who the three top-paid executives (who are not on the board) are and how much they have been paid.
But now, at last, Coronation has promised to reveal its remuneration policy. It will be on show in its next annual report, due out in November.
Extracting that promise has taken almost two years of dogged engagement by shareholder activist Theo Botha.
Botha, who is nothing if not determined when he takes up an issue, reached such a state of exasperation he felt forced to engage a legal firm to help him in his battle.
That this should have been necessary reveals the extent to which, for all the talk to the contrary, robust shareholder engagement is reserved for the well resourced.
After the January 2016 annual general meeting Botha presented Coronation CEO Anton Pillay with a request in terms of the Promotion of Public Access to Information Act (Paia) for the company’s remuneration policy.
In early February Pillay replied to Botha, saying that while he respected his rights as a shareholder he felt Botha had not satisfied the Paia threshold requirement.
At that stage Botha realised he needed the help of a lawyer.
On July 26 — in response to a letter from Adam Pike of Pike Law, acting on behalf of Botha — Coronation said it would be "disclosing its remuneration policy in its next annual integrated report", due out in November.
Coronation’s previous attitude is difficult to explain, given that even die-hard intransigents like Caxton have bowed to the inevitabilities of 21st century life as a listed company and made the necessary (and appropriate) disclosures.
Two other, much smaller, listed fund managers, Sygnia and Anchor, also thought they should be allowed to play hard and fast with governance recommendations about remuneration. But they opted to be more forthcoming after Botha harangued them at their annual general meetings.
The U-turn by Coronation raises two obvious questions: why was the fund manager so determined to keep the details of its remuneration policy secret, and what happened between February 10 this year and July 26 to change its mind?
Coronation has said it doesn’t want to add any further comments at this stage.
Given the level of secrecy that shrouds the issue, it’s likely those questions will forever remain in the shadowy realm of speculation and conspiracy. Few outside the fund management industry any longer accept Pillay’s line — that this is a "uniquely people-driven business" and revealing its remuneration policy would dilute its ability to attract world-class talent.
The secrecy didn’t stop Old Mutual from poaching three of Coronation’s top analysts recently.
"Industry players don’t need to see the remuneration policy; they know what’s in it; they see the fancy houses and cars. The only ones who don’t know are the public, whose money is being managed by this industry," Botha says.
For years Coronation has claimed to tick all the boxes of the King code of corporate governance, which relies on a flabby "apply or explain" system.
"They didn’t actually explain why they weren’t disclosing their remuneration policy, they just described why they weren’t," says Botha.
Part of the explanation for Coronation’s secrecy certainly does lie in its line of business, but not because it is uniquely people-driven. It happens to be the largest fund manager listed on the JSE.
It manages R600bn of other people’s money and has done remarkably well for those people. But it has done even better for the people who invested in Coronation shares, such as its own employees. For years the company has headed the list of top performers on the JSE.
In this context it’s significant that none of the other heavyweight fund managers, such as Old Mutual, Sanlam, Liberty Asset Management, Allan Gray and the Public Investment Corp, has direct exposure to a listing.
Old Mutual, Sanlam and Liberty are each part of a much larger listed entity. Allan Gray and the PIC have no exposure to a listing.
This may help to explain why, despite disclosure of a remuneration policy (and a nonbinding vote on it) being a central requirement of corporate governance, Coronation has been allowed to ignore it blithely.
The other fund managers are major investors in Coronation, and if they had any qualms about its continued refusal to toe the corporate governance line they would have reined it in promptly.
That they didn’t bother could have been prompted by the realisation that any spotlight shone on Coronation would have shown them up too. Perhaps these fund managers reckon the last thing the saving public and pensioners need to know is just how much money they are making on the management of other people’s money.
A conspiracy of silence within a crony-riddled local environment may go some way towards explaining how Coronation was allowed to escape any sort of censure for so long.
All in all, it is a shocking indictment of the state of corporate governance in this country and highlights the inherent weakness of relying on vigorous oversight by fund managers.
It will add fuel to calls for a switch from a recommendations-based system to a more laws-based one.
Adding to the indictment against the SA system is the possibility that international developments played as big a role in Coronation’s Damascene-style change of heart as Botha’s haranguing.
Oversight of corporate governance, particularly of remuneration at financial institutions, is much more vigorous beyond SA’s borders.
Pillay and his board may have looked to developments in global markets (where the fund manager is keen to grow) and realised its days of secrecy were numbered.