Telkom board seeks tighter control
Telkom’s board is looking to get approval on a number of resolutions which will make it easier for the company to execute its turnaround strategy without having to call shareholder meetings.
According to the company’s memorandum, ahead of its Annual General Meeting (AGM) on 27 September, the Telkom board is asking shareholders to consider 8 special resolutions.
Top of the list, the Telkom board is seeking approval to buy back 10% Telkom ordinary shares if it needs to.
According to the company, the share buy-back would be used to implement another special resolution – an employee share scheme, which would look to incentivise employees to assist in turning the company around.
In order to balance the interests of the company and shareholders, the board proposes that the repurchasing of shares be capped at 10% of issued share capital.
To further assist in the implementation of its employee share scheme, the board is also proposing that it gain authority to lend financial assistance to “subsidiaries and other related entities…and to directors and prescribed officers and other persons who may participate in the employee forfeitable share plan”.
“The granting of this authority will enable efficiency in decision-making, and will do away with the need for the Board to call a Shareholders’ Meeting when it requires entering into certain transactions where financial assistance might be required,” Telkom said.
In terms of the Company’s Act, such authority would extend to people related to directors as well (vis-a-vis, family members), which the Telkom board described as “broadly applicable”.
Acknowledging that the definition in terms of the Act is too broad for the proposed purpose, the board recommended removing all references to “persons related to director” in its authority.
According to the memo, the Telkom board will use the financial assistance authority to provide loans to qualifying participants of the share scheme who need to meet share ownership requirements.
The draft share scheme for employees seeks to focus employees on turning Telkom around by:
- Linking rewards to performance;
- Differentiating rewards (big rewards for big work, small rewards for lesser work); and
- Aligning employee and shareholder interests.
Of the 520 million shares in issue by Telkom, 5% (26 million) can be used for the share scheme. Shares will be granted based on base pay and grade, determined by the Telkom remuneration committee.
Other resolutions proposed by the company would see non-executive directors getting a 0% (zero) increase in remuneration, “in acknowledgement of the need for cost containment given the challenging circumstances facing the Company.”
In order to gain the authority to implement its strategy, the Telkom board needs 75% shareholder approval.
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