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Sasol’s non-executive directors came within 1.77 percentage points of making corporate history at Friday’s AGM, when 23.23% of shareholders voted against paying non-executive directors for financial 2021.
Despite extensive board campaigning in the lead-up to the meeting, including a commitment to take a 20% reduction in fees, the special resolution needed for the authority to pay non-executive directors only managed to secure 75 % necessary. .
The resolution on the fees of non-executive directors, which traditionally secures about 99% of shareholder support, obtained only 76.77%.
Additionally, 56% of shareholders voted against the Compensation Implementation Report, which deals with Sasol’s executive compensation.
The results of the vote, announced at the end of a four-hour AGM, elicited the only refined response from the board of directors, with Chairman Sipho Nkosi saying: “We take the message that you have conveyed to us by how you voted on the report. implementation of the remuneration policy and some of our other agreements ”. He added: “We got the message.”
It was the first indication that someone at the meeting was receiving a message from the shareholders attending the AGM.
Indeed, for most of the hours leading up to it, it was difficult to decide whether to admire Sasol’s directors for their stubborn determination to appear unflappable in the face of relentless challenge from shareholders, or to be deeply concerned that they might not quite understand the scope. of the existential threat they face.
Things are good …
For four hours (five if you include the general meeting held just before the AGM), shareholders questioned the board about Sasol’s environmental destruction, the generous directors’ fees, and its relationship with the engineering group based in United States, Fluor. And, judging from the directors’ response, everything seems to be in order.
Everything is tickety-boo in the South African National Oil Champion:
- Sasol has won awards for its reports and complies with all South African environmental regulations.
- Directors’ fees are actually lower compared to peer groups.
- And as for Fluor, well, the lawyers and consultants investigated it and found no wrongdoing.
There you go
In fact, at one stage early in the proceedings, CFO Paul Victor made such an upbeat comment on Sasol’s operations, a ‘buy’ recommendation seemed in order, until he added, almost as an aside: “ … On the downside, we had to book R112 billion of impairments. ”
Lake Charles Sale
Victor’s optimistic outlook even extended to the sale of a 50% stake in the Lake Charles base chemicals business in the US for $ 2 billion. He managed to present the sale, which required R72 billion from cancellation, as a good deal for the group.
It was a view that seemed to be supported by CEO Fleetwood Grobler, who said the group’s remaining 50% stake in the joint venture with global chemical company LyondellBasell Industries meant it could be involved “on the bright side” if Sasol decided to sell its 50% at some later stage.
Read: Sasol to sell Lake Charles stake for R33.38bn
For five hours (remember the general meeting), the directors answered questions as if the shareholders did not fully understand the workings of a remarkably large and complex global energy and chemicals group. Implicit in much of his answer was the belief that Sasol was in excellent hands and the shareholders, indeed all stakeholders, had nothing to worry about.
Things have changed
Until about five years ago, the implicit attitude that most people who questioned the board were part of some fringe group that could be sponsored rather than seriously dealt with worked for Sasol’s directors. But somewhere along the line, and seemingly unnoticed by Sasol’s board, things subtly but dramatically changed. Sasol’s directors now seem part of a fringe group and their interlocutors the mainstream.
For a variety of reasons, including perhaps the receipt of awards and continued acquiescence by the government to Sasol’s calls for regulatory leeway, Sasol’s directors seem unaware that they are now on the sidelines.
Mike Martin of proxy advisor Active Shareholder told Moneyweb after the AGM that it was evident that Sasol’s approach to the environment remains as stated in its 2018 integrated annual report: “Sasol is confident of getting deferrals along with others. mechanisms like air quality offsets our compliance challenges. ”
An environmentalist told Moneyweb that Grobler’s claims of complying with the rules are challenged by the group’s own reports, which admit the violations.
During the AGM Grobler indicated that the board would continue to rely on its importance to the South African economy and South Africa’s status as a ‘developing’ country to protect it from any tightening of regulations.
With its main cash-pumping operation in Secunda labeled the world’s largest source of greenhouse gas emissions, it is unlikely that global players will continue to indulge its claims from “developing” countries. Similarly, the biggest potential source of pressure is likely to cease to be the complacent South African government.
Financiers around the world are now more aligned with environmentalists than with Sasol’s board.
Any doubts about this will have been dispelled by the news that, in the wake of Joe Biden’s election victory in the US, the Federal Reserve has asked to join a group of central banks committed to using the financial system to mitigate climate risk.
Read:
Sasol rejects demand for shareholder resolutions on climate
Climate risk continues to weigh on Sasol – Old Mutual
Hopes that a successful Lake Charles Chemicals Project (LCCP) would have provided Sasol with a financial safe haven have been cruelly dashed and the once-cash group now has to deal with severe balance restrictions just as the environmental pressure seems to increase.
Listen: Grobler Tells Nompu Siziba Sasol Is Committed To A New Emissions Reduction Strategy
The Fluor and Constable Affair
Regarding the relationship between Sasol and Fluor, who was the principal consultant to the LCCP, Grobler attempted to dismiss shareholder concerns by stating: “We have resolved all outstanding issues related to Fluor; Fluor did everything it was required to do under our contract. We think we are done with that matter. ”
On the role of former Sasol CEO David Constable, Sasol CEO Vuyo Kahla told shareholders that a report, conducted by a team of lawyers and consultants, had found no wrongdoing on Constable’s part and, therefore, no action would be taken against him. Constable, a longtime Flour executive, joined Sasol as CEO in 2012 and led the LCCP investment.
In 2016 he left Sasol to return to Fluor, where he was recently appointed CEO.
The shareholders were not persuaded. Some ask for details of the fees paid to Fluor each year between 2010 and 2020, as well as the publication of the full report by lawyers and consultants.
About that 20% cut in the rate …
On the issue of non-executive directors’ fees, which Active Shareholder noted have risen more than 300% in the last 10 years, Martin said the statement repeated by the chairman of the compensation committee, Mpho Nkeli, says that directors Non-executives were charging a 20% fee. cut off – was a bit misleading.
Only board fees are being cut; committee fees are not cut.
Furthermore, the introduction of generous travel allowances is likely to ensure that non-executive directors are better off in 2021.
As for US non-executives being on the low side of their peers, it is difficult to determine, given Sasol’s situation, who his appropriate peers are.
Martin said Sasol’s refusal to file a resolution on non-executive directors’ fees each year creates a potential crisis for the group, as the Companies Act requires these fees to have been approved within the last two years.
While Sasol’s approach is within the law, it is not best practice.
“It is very unfortunate that Sasol, despite his beautiful words, only does the minimum required in terms of the law. This is the case of the fees of non-executive directors, it was the case of Sasol’s refusal to put the appointment of auditors to a vote [forcing the JSE to make it mandatory] and it is even more disturbing in its approach to the environment. ”
Read: Sasol shareholders struggle to keep up with their news
