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Discovery executives make bank
Rumination report
It's Financial Journalism 101 that anything published on the Stock Exchange News Service after 17:00 on a Friday deserves extra scrutiny.
It's an irresistible slot to bury bad news, with many South African company watchers' attention already diverted by a tall glass of frosty by that time.
This past Friday's JSE Unhappy Hour yielded the announcement that Discovery's annual report is available. Of particular interest is its contentious remuneration report. Shareholders holding 40% of the company's shares voted against its implementation at the last annual meeting.
After consulting with these unhappy shareholders, Discovery said their gripe is that performance targets, which remuneration is measured against, were too "non-financial". These key performance indicators have been changed to 65% (from 60%) for financial targets and 35% non-financial (which include ESG). Also, some shareholders were unhappy that two-to three-year rolling measures were used, which they say rewarded "backward-looking" performance. This was changed to one year for most financial targets.
Ahead of proposed new changes to the Companies Act, which will force businesses to report the gap between lowest-paid workers and highest-paid executives in a company, Discovery is now also awarding annual increases of at least 10% to those employees who earn below R148 000 per year.
The lowest-paid workers have some catching up to do: The top seven executives at Discovery received almost R190 million (including bonuses and vested shares) over the past year. Founder and CEO Adrian Gore got more than R28.3 million.
Will shareholders look more kindly on these pay packages? Probably not. While the company has tweaked some remuneration rules, investors won't be in a particularly good mood to reward performance.
Discovery's shares have lost 14% over the past year, and shareholders haven't received dividends since March 2020. The company is pumping all its cash into its new ventures: its local bank and short-term insurance business, and its Chinese health insurer Ping An.
Discovery executives have their work cut out for them. The exuberance about China has truly soured in recent weeks, while short-term insurance is facing a perfect storm in SA and there has been some pushback against Discovery's efforts to bulk up its bank clients – including by forcing Discovery Health clients who signed up to Vitality to open a Discovery Bank account if they want to access travel rewards.
While holding onto dividends may not sweeten the shareholder mood, it seems prudent amid the many demands of growing new businesses.
And in the end, executives don't have to worry about unhappy shareholders standing in the way of big payouts anyway.
Currently, shareholder votes are non-binding: shareholders can vote against executive remuneration year after year. In the worst-case scenario (if more than 25% voted against), the company must consult with shareholders about their concerns. Until this changes, investor discontent about remuneration doesn't mean much.
Quote of the day
Comparison of the day
Currency against US Dollar, past year.Russia: +13%Brazil: +6%Switzerland: -8.8%Indonesia: -9.7%India: -9.8%Canada: -9.8%China: -13%Euro: -13.8%Australia: -14.7%Euro: -15.1%South Africa: -19%South Korea: -21%Japan: -29%Pakistan: -29%Turkey: -93%
— The Spectator Index (@spectatorindex) October 30, 2022
Number of the day
Number of South African homes valued at more than $1 million (R18 million) as at June 2022. (Source: New World Wealth)
Previously:
STOCK TAKE | Heineken keeps it green, Godongwana's careful words and SA's tax revolt odds
STOCK TAKE | In praise of SA's great worriers
STOCK TAKE | Eskom (sort of) stimulates business spending, while super yacht heads SA's way
STOCK TAKE | Telkom gets jilted and Markus 2.0
STOCK TAKE | The Dis-Chem drama - and Pick n Pay slump points to trouble ahead
STOCK TAKE | A tale of two smelters, and did banks get it wrong on home loans?
STOCK TAKE | Reserve Bank walks the hawk talk and Harmony re-emerges down under
STOCK TAKE | Allan Gray takes shine to Gold Fields - and Anglo's Kusile-sized generator
STOCK TAKE | Pick n Pay's big bet - and should you follow Gerrie?
STOCK TAKE | Is Sasol's hydrogen plan just hot air?
STOCK TAKE | Karooooo grows its Os and Ackerman states it like it is
STOCK TAKE | A German cure for SA labour woes - and what’s Schadenfreude in Swedish?
STOCK TAKE | Allan Gray takes shine to Gold Fields - and Anglo's Kusile-sized generator
STOCK TAKE | Telkom avoids signal loss amid the Rain - and the Woolies wage way
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