MultiChoice under fire for paying executives R127 million
MultiChoice shareholders voiced their displeasure at the company’s remuneration for executives and non-executive directors at its annual general meeting (AGM).
Remuneration issues were the most contentious votes at the meeting held on Wednesday, 28 August 2024.
The vote on the endorsement of the company’s remuneration policy saw 17.89% of the total issued shares abstain, while 6.36% of the remaining shares voted against the policy.
While 6.36% against doesn’t sound like much, it is important to view this in the context of the other resolutions tabled at the AGM.
No other resolutions at the meeting had any abstentions, and the next-highest vote percentage against a resolution unrelated to remuneration was 3.4%.
The other resolutions involving remuneration received even more votes against, although both passed.
A resolution for the endorsement of the implementation of the remuneration policy had 23.65% votes against, while 14.1% voted against approving the remuneration of non-executive directors.
MultiChoice executive and director pay has come under fire recently, especially after the company’s dismal financial performance.
MultiChoice CEO Calvo Mawela, CFO Tim Jacobs, and former chairman Imtiaz Patel were paid R127 million despite the company reporting its worst financial results since it was founded.
The company’s 2024 annual report revealed that Mawela was paid R53 million in the last financial year.
His pay package included a base salary of R12.8 million, short-term incentives of R8.1 million, and long-term incentives of R25.6 million.
Controversially, Mawela also received R4.7 million in benefits, including medical, fringe, family, travel, and long-service and disability benefits.
Jacobs received a pay package of R28.9 million last year. His benefits amount to R1.2 million and include a “European contract”.
Former MultiChoice non-executive chairman Imtiaz Patel, who stepped down on 23 April 2024, received R45.7 million last year.
| Resolutions — MultiChoice AGM 2024 | Votes for | Votes against | Abstained |
|---|---|---|---|
| Endorsement of the company’s remuneration policy | 93.64% | 6.36% | 17.89% |
| Endorsement of the implementation of the remuneration policy | 76.35% | 23.65% | 0% |
| Approval of the remuneration of non-executive directors | 85.9% | 14.1% | 0% |
| Votes for and against are a percentage of shares that voted. It excludes abstentions. | |||
MultiChoice explained that Patel did not receive director or meeting fees. Instead, he received an annual fee of $1 million relating to the service and restraint agreement. He also received travel reimbursements related to business travel.
“Patel played a leading role in the successful completion of the Showmax deal with Comcast during the 2024 financial year,” the company said.
“He started developing the deal over the Covid period while executive chairman when discussions commenced for a strategic partner.”
On the recommendation of MultiChoice’s remuneration committee at the time, a bonus of $1.25 million was approved.
Therefore, Patel received $2.509 million over the last financial year, translating into roughly R45.7 million.
Following Patel’s departure, MultiChoice’s new chairman, Elias Masilela, said the fees paid to certain board members were under review and likely to be stopped.
“These were legacy contracts that were necessary for the company,” said Masilela.
“We know that when you employ board members, you employ people who are experts in their own fields as it may be quicker to get an answer from them on a technical aspect rather than getting that from the outside, which can take longer.”
This came to a head recently with MultiChoice’s longest-serving board member, Jim Volkwyn.
One of MultiChoice’s major shareholders, the Public Investment Corporation (PIC), vowed to oppose Volkwyn’s re-election, saying it would be a breach of corporate governance principles otherwise.
Among its concerns was that Volkwyn received over R10 million in fees since his agreement with the media giant started in 2018. The agreement was set to expire in 2028.
“There have to be consequences where corporates are tone deaf and create structures that are used to undermine the principles of corporate governance,” PIC chairperson and deputy finance minister David Masondo said.
The PIC is the South African government’s investment arm and Africa’s biggest asset manager. It counts the Government Employee Pension Fund among its clients.
It holds a 15% stake in MultiChoice.
Following the PIC’s public statements on the issue, Volkwyn decided not to stand for re-election to the board and retire from MultiChoice.
This is not the first time shareholders have registered disagreement with MultiChoice’s remuneration practices.
Last year, only 2.26% voted against the endorsement of the remuneration policy, but 15.84% voted against the proposed remuneration of non-executive directors.
However, in 2022, 3.65% opposed the policy, 31.7% voted against endorsing the remuneration implementation report, and 11.17% voted against the proposed remuneration of non-executive directors.
Another notable vote was the re-election of Patel as a director, which 29.08% of shareholders opposed. The other directors up for re-election — Elias Masilela and Louisa Stevens — received over 99% votes in favour.
There was a shareholder revolt in 2021, with 64.23% voting against the company’s remuneration policy and 18% opposing the resolution on the remuneration of non-executive directors.
Similar to the year before, there was a vote to re-elect certain board members. Volkwyn was up for re-election, and 34.11% of shareholders voted against it.
There were very few abstentions in 2021, 2022, or 2023.
“We have a large shareholder base, and it is quite normal for shareholders to have different views,” a MultiChoice spokesperson said in response to questions about the remuneration votes at the 2024 AGM.
“It is not always possible to please everyone, but we follow a pragmatic approach and try to find as much common ground as possible between shareholders.”
MultiChoice said it was grateful that shareholders supported all the resolutions.
“Receiving another high vote of support for our remuneration policy (94%) confirms that we are on the right track,” it said.
“The vote for the implementation report (76%) was above the threshold required by King IV, but was lower than last year mainly due to one of our larger local shareholders having a different view on one of the metrics that applied to a specific set of historic awards.”
MultiChoice said that as this won’t be applicable in future, the issue is not a recurring one.
“Nonetheless, we will keep up efforts of engaging shareholders and enhancing policies and disclosure where applicable.”
Increasing discontent about executive and director remuneration comes amid MultiChoice’s worst financial results since the company was listed on the JSE.
MultiChoice, which owns DStv, Supersport, Showmax, Irdeto, and Kingmakers, is in serious trouble and had to start selling assets to fund its operations.
Analysts described MultiChoice’s annual financial results for the year ended 31 March 2024 as “truly awful” and “scary”.
The broadcaster’s loss for the year increased from R2.9 billion to R4.1 billion, and had become technically insolvent.
It suffered a 9% decline in active subscribers, including a 13% decline in the Rest of Africa business and a 5% decline in South Africa.
In June, MultiChoice announced that it was selling 60% of its insurance business to Sanlam for R1.2 billion and a potential performance-based cash earn-out.
The money will be used within the MultiChoice group for working capital purposes. Simply put, MultiChoice needs the money to fund its operations.
Wayne McCurrie from FNB Wealth and Investments described MultiChoice’s latest results as awful.
The only reason the share price did not plummet is that Canal+ offered to buy all of the outstanding MultiChoice shares at R125 each.
However, McCurrie warned that there were significant uncertainties around the deal.
A known hurdle is that the transaction must still get approval from the Independent Communications Authority of South Africa and the Competition Tribunal.
Shareholders will also have to “hope and pray” that the deal doesn’t have an exceptional circumstances clause allowing Canal+ to pull out based on the poor results MultiChoice was posting.
McCurrie said the share price could plummet from its current level of around R110 to as low as R40 or R30 if there was no Canal+ deal.
David Shapiro from Sasfin Securities advised shareholders to “take their money and run” — a sentiment McCurrie and Shane Watkins from All Weather Capital echoed.
Another question that has arisen considering MultiChoice’s financial position is why its top executives, including Calvo Mawela, live in Dubai at the company’s expense.
MultiChoice Group has had a corporate home in Media City Dubai since 2008, and Patel moved there in May 2017.
Very little is known about MultiChoice and its executives’ presence in Dubai. However, insider information sheds some light on the matter.
MultiChoice does not have a commercial presence in Dubai. Many believe it will benefit the company if its chief executive is based in South Africa, its biggest market.
Apart from having contact with staff and customers, it will also cut down on spending millions for him and his family to stay in Dubai.
The company insider said executives in Dubai receive numerous benefits, including accommodation, travel, kids’ school fees, and related costs.
One executive was rumoured to live in the luxury Grosvenor House 5-star hotel, and another in the prestigious Emirates Hills, where the Gupta family has a residence.
Being based in Dubai may explain why Mawela’s R4.7 million in benefits dwarfs that of other executives, including CFO Tim Jacobs.
A MultiChoice spokesperson said the decision to base certain executives in Dubai stems from the strategic importance of the Rest of Africa business.
“It constitutes a significant portion of our operations, covering 50 countries and 60% of our video entertainment subscriber base,” he said.
“Dubai’s status as an international hub affords us optimal access to global markets and partners, facilitating ease of travel to our operations across Africa.”
The spokesperson added that Dubai’s international business environment enables them to attract the best talent at the managerial and executive levels.
“Our Dubai office primarily serves the Rest of Africa regions, and it is important to note the office has twelve people, including the Group CEO,” he said.
Regarding whether Mawela and other executives are based in Dubai to take advantage of its low taxes, MultiChoice only said that they comply with all applicable tax laws in South Africa and the UAE.
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