A charm offensive by Naspers directors quelled shareholder discontent at this year’s AGM, but corporate governance and remuneration remained high on shareholders’ agendas.

Naspers has improved its reporting of remuneration and was more willing to engage with shareholders on their concerns, but shareholders aren’t yet satisfied with the extent of its advancements.

Among their concerns is the independence of directors such as Rachel Jafta and Fred Phaswana, who have been on the board since 2003.

With Jafta earning US$512 000 (R7.3-million) as a director, a shareholder pointed out that this was essentially, if not her primary source of income, certainly her largest, making it difficult for her to be independent. Company secretary Gillian Kisbey-Green said in terms of King IV, duration of tenure is not the only thing to consider when judging independence, and that Naspers valued continuity, history and knowledge.

PwC also came under the spotlight, given that it has been Naspers’s auditor for 25 years.

Naspers chairman Koos Bekker was widely criticised for his combative responses last year and rephrased his words, blaming his “inability to articulate” for last year’s comments.

“If you have a good company you can go wrong in two ways — screw up against good governance or lose by being out-competed by competition. We want to emphasise both,” he said, but indicated Naspers found it hard to do both simultaneously.

“We support King IV fully, and our commitment to King is not conditional,” he said, but added that to win a soccer game, you have to do two things — play within the rules and beat the opposition, and it is “a tricky thing to do both at the same time”.

More disclosure

Answering shareholders’ concerns, Naspers has recomposed its remuneration committee and disclosed a lot more, he said.

Asked why Naspers had not published its investigation into MultiChoice’s payments to the Gupta’s ANN7, legal counsel David Tudor said the investigation revealed no irregular payments, but “the report is privileged and confidential and we intend to maintain that privilege”.

Despite improving disclosure on remuneration, 56.96% of ordinary N shareholders voted against endorsing the company’s remuneration policy, 47.76% against approving the implementation of the remuneration policy, 84.91% against the authority placing unissued shares under the control of the directors, and over 20% against reappointing PwC as auditor and the reappointment of directors Ben van der Ross and Jafta.

At the AGM, directors justified exorbitant salaries. “We have to invest in our entrepreneurs,” Bekker said, adding that they were sometimes socially dysfunctional but they were “the lunatics that really make it happen” and want to share in the wealth they create.

Addressing the issue of the “sum of the parts” discount that Naspers trades at, Bekker said this was largely out of the group’s control as investment funds limit their exposure to a single company in their portfolios. When Naspers goes over that percentage, they sell down shares and that drives down the price. When Naspers grows faster than the market, their exposure goes up and they sell again.

Secondly, he said, there is the political discount. An investor buying in Hong Kong assesses risk and tax in Hong Kong and in South Africa and wants a discount if there is more tax or more political risk in South Africa. “Those two factors — that we are too big for the exchange and the political discount — we can do little about.”

Addressing the suggestion that Naspers break up into separate companies, he said the big tech companies in the US and in China have grown while smaller companies have declined because bigger companies’ size gives them the platforms and the market power, and he questioned whether “being 10 little units is the best policy long-term” rather than a powerful group.

CEO Bob van Dijk said Naspers has adapted and changed itself, from deriving 90% of revenue from media and video entertainment a decade ago to 80% from online — which will move to 100%.

The group has reorganised into segments in 2014, clustering assets that worked well together, and has weeded out a number of assets which were not so promising. It has prioritised assets that had potential, focused on execution and done a number of fairly significant transactions.

Today, Naspers is seeing value coming in from these moves. E-commerce is growing fast and its “loss margin” has reduced drastically, while this year the classified business is profitable for the first time.

Proceeds of the sale of a portion of its holding in Tencent will be directed towards accelerated growth and to take advantage of opportunities in classifieds, online payments and food delivery.