Koos Bekker, the dragon-slayer

Naspers chairman Koos Bekker used the platform afforded him at the company’s AGM on Friday to slay a few shareholder dragons – first up being the notion of corporate governance.

“It sounds wonderful. If you want to be the best soccer team in the world it is important to wash your hands after using the bathroom. But will you win? Not unless you train the hardest, recruit the best and are merciless in your ambition.

“Once you have won, then you can look at things. If you lose, the best governance in the world can’t help you.”

Bekker did not explain his reason for his dig at corporate governance. After all Naspers is the third largest company on the JSE by market capitalisation and can hardly be considered a loser.

Perhaps it had something to do with the criticism by asset managers and other investors of Naspers’ remuneration policy, which reached fever pitch recently and culminated at the AGM, which was held in Cape Town on Friday.

Bekker made a show of entertaining questions from shareholders, including shareholder activist Theo Botha. But after three rounds of three questions, Bekker refused to take further questions from Botha or anyone else and called an end to the meeting.

“1 to Naspers, 0 to Botha,” the activist said following the meeting. “What happened to the notion that shareholders could pose questions to management at an AGM?”

That the Naspers board does not like answering what it considers irrelevant questions on the business is clear. But things are changing with regard to remuneration disclosure and perhaps Botha will have the last laugh.

Listed companies can no longer choose to ignore King IV, says Melanie de Nysschen, corporate finance principal at Bravura. That is because certain of the King IV requirements have been included in the JSE Listings Requirements and become mandatory for listed entities.

“Listed companies will be required to disclose in their annual report the voting results and the nature and steps taken to address objections raised by shareholders,” she says.

This is particularly so if more than 25% of shareholders vote against the remuneration policy. In its case just 18.43% of Naspers shareholders voted against the policy.

The AGM was well attended and shareholders did not only want to discuss remuneration, but also to address concerns relating to the dominance of Tencent in the business.

Over the last two years the value of the Tencent stake relative to Naspers’ market capitalisation has grown from 90% to 130% and continues to accelerate.

The Chinese media giant grew its topline business by 55% in the last quarter. Meanwhile the value of Naspers’ dozens of other investments and businesses, which include media, e-commerce and pay TV, has declined to negative R340 billion over the last two years.

Bekker slayed this dragon with gusto.

“We [Naspers] were advised to sell our stake in 2004, when shares in Tencent were worth one Hong Kong dollar. Five years ago there was agitation to sell at HKD45, and again today at HKD325, people want us to sell. We think the price is going up, and that this is the best opportunity for our cash at the moment.”

The third dragon – how to extract value from Naspers’ other businesses (which have been discounted to below zero by the market) was also slayed.

“Some people are obsessed with the idea that the share trades at a discount to the parts. Most composite companies run at a discount. In the last five years the big four (Facebook, Amazon, Netflix and Google), which are all composites, have outperformed the market by 120%,” Bekker says. “The argument for breaking up Naspers is completely illiterate.”

Naspers CEO Bob van Dijk added that losses in the e-commerce businesses were declining and that 21 of the companies were now profitable.

“Five years ago, the top five companies on the stock market were oil and finance companies. Today the top five are technology companies,” he says. This is not over and the big will grow bigger. “Amazon, Google, etc – they are coming after all of us. Scale is very important. If we don’t have scale, or if we underestimate the competition, we will be eaten alive.”

And that is the problem. AGM’s are ideal places to gauge corporate culture. In some companies the board of directors embraces the opportunity to engage with shareholders and share valuable information. They are delighted you have taken the trouble to attend and are eager to talk.

At Naspers’ the AGM feels a bit like an exercise in mutual back-slapping: directors for rewarding shareholders so handsomely over the years; and shareholders for being so loyal.

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