BUSINESS NEWS - In what could be interpreted as an indication of the extreme precariousness of Steinhoff’s existence, the retail group’s remuneration committee defines ‘long term’ as just one year.
It is because of this unique perception of ‘longevity’ that CEO Louis du Preez’s annual bonus and one third of his long-term incentive are paid out in the same year. And are paid out entirely in cash.
In 2020 Du Preez’s accrued annual bonus and a portion of the long-term incentive, awarded at the beginning of that financial year, amounted to €1.5 million. It accounted for 44% of his total remuneration package of €3.4 million (R62.2 million).
That’s an increase of 26% on his 2019 package of €2.74 million (R49.4 million).
These figures are not going to go down well with long-suffering shareholders who, the remuneration committee notes, were concerned about the “size of the compensation packages in relation to the decreasing size and scope of the company”.
That concern was part of the reason the advisory vote on the remuneration policy was not passed at last year’s annual general meeting.
Shareholders were also concerned about the “lack of an equity-based compensation component with a sufficient long-term character, and the limited level of share ownership among executives”. It wasn’t just a matter of no long-term-based equity compensation, it was no equity compensation at all for the top executives. Shareholders might be inclined to assume that Steinhoff’s remuneration committee doesn’t believe the group has a future, even a 12-month-long future.
Shareholder concerns ‘considered’
According to the recently released annual report, the remuneration committee considered shareholders’ concerns, then went ahead anyway and did what it had planned to do.
Which is to pay the key executives huge packages of cash with not one share-based award in sight.
To be fair to Steinhoff’s remuneration committee, it is faced with a unique set of circumstances.
Du Preez, a long-term legal advisor to the company, ended up in the CEO position by default and is trying to rescue the company rather than run it. So he is probably being paid as a financial engineering expert rather than a business manager.
This may be why the remuneration committee also chose to ignore shareholders’ concerns about Steinhoff’s remuneration packages being comprised entirely of cash – no share-based awards have been given.
This makes sense as Du Preez is likely to jump ship as soon as the rescue process is completed. His interest in how well Steinhoff’s operations are doing is likely to be restricted to its immediate impact on the rescue process. Solid performances from the operations make that process so much easier.
