Telkom shareholder questions R18.8 million pay to former CFO
The Public Investment Corp (PIC) – which manages assets of over R1.8 trillion, including the bulk of government’s pension money – has questioned the remuneration policies of some of the country’s biggest companies, including Telkom.
According to a report by Bloomberg, the PIC voted against the pay policies at more than one third of the annual general meetings it attended between July and September 2015.
Bloomberg cited a ‘strictly confidential’ document, which shows that the government’s wholly owned investment arm, did not endorse compensation policies at Telkom.
The PIC has a 11.93% stake in Telkom, while the government has an approximate 40% stake in the listed telecoms operator.
The investment company said of Telkom:
“Endorsement of the remuneration policy – Telkom’s short-term bonuses are based on profitability measures only. However, the group does not disclose what the specific targets are as this would amount to profit forecasting and furthermore we raise a concern that there are no sustainability targets set.
“TKG (Telkom’s listing code)provides information around the STI and LTI benchmarks BUT no details are given around what is included/excluded from these. TKG’s EBITDA was significantly boosted by external and extraordinary items, and we believe that these should not be part of calculations for incentives.”
The PIC expressed particular concern over the remuneration of former chief financial officer, Jacques Schindehutte, who it states was paid a total of R18.8 million in FY ’15,
“despite being suspended and retiring only five months into the year”.
In FY ’2015, Schindehutte was paid:
- His guaranteed package of R6.55 million – his pay continued while he was suspended.
- Fringe and other benefits of R12.2 million, made up as follows:
- R1.25 million as a STI (short-term incentive) payment relating to FY ‘14
- R10.3 million as LTI (long-term incentive) payments for FY ’14 and ’15
“We cannot assess whether the LTI payment was appropriate or not given the lack of disclosure around both the settlement and the disciplinary process. It has been indicated that the payment was made due to the design of the package and nature of Mr Schindutte’s exit from TKG which is concerning to us and raises another area of the remuneration policies’ weakness,” the PIC said.
Schindehütte was suspended in October 2013 after “certain allegations” against the executive came to light. He quit the group in August 2014.
Speculation was rife that the suspension was related to a R6 million loan offered to Schindehütte by Telkom, which triggered an insider trading enquiry instituted by the JSE, but the company dismissed this.
The telco maintained that the suspension was over a matter of Schindehütte’s personal misconduct, and not claims of insider trading.
Telkom has come under criticism from trade unions in recent months for its retrenchment policies.
Telkom offered voluntary severance packages (VSP’s) and voluntary early retirement packages (VERP’s) for a large portion of its workforce in March.
Bloomberg noted that the telco is looking to trim as much as 40% of its total workforce as part of an ongoing effort to cut costs. It wants to trim its workforce by 8,000 by July.
Trade union, Solidarity noted that Telkom is restructuring for the tenth consecutive year. During that period, the company has seen its workforce shrink from 23,245 to 13,895.
More on Telkom
Telkom has lost nearly 10,000 workers over the past 10 years
Telkom ‘waging war’ against its employees: union
Telkom in mass voluntary retrenchment offer to its workforce
Telkom plan to transfer hundreds of workers faces opposition
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