TRUWORTHS INTERNATIONAL LIMITED - Active Shareholders
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TRUWORTHS INTERNATIONAL LIMITED http://www.truworthsinternational.com/investors Annual General Meeting Proxies voted 7th November 2019 Financial Year End: 30th June 2019 The Ditikeni Trust The Truworths International board views governance as more than a compliance discipline, it is disappointing therefore that no Lead Independent Director has been appointed. We are concerned that the independence of the board and audit committee is not what we would wish to see, the board is dominated by long serving members, we recognise their experience and that there have been some new appointments in the past two years, but more needs to be done to ensure the board is independent. Shortly before the 2018 AGM, the company issued a statement on its remuneration policies, the 2019 Integrated Annual Report (Report) notes in general, the changes that have been made to the remuneration policies. However, the information provided is not sufficiently detailed and remuneration policy and implementation are not clear. Further, there is no proper information on non-financial targets. It is of concern to all shareholders that management did not qualify for a Short-term or Long-term bonus, this should be explained. We noted last year that the Social and Ethics Report was excessively brief and short on detail. This report remains wholly inadequate. The diversity of the board is improving but the promise in the statement issued at the 2018 AGM has not been fulfilled. More concerning is the dominance of management by white men, this for a company whose customers are largely female in a country where most customers and future market growth is black. The report makes good use of info-graphics and is comprehensive in its scope if not in the details. This year it is laid out in landscape format which is a great improvement, it is however not possible to have the whole page open and to be able to read it on a laptop screen. Lay out is good and hyperlinks to the company website work, there are no page links but referencing is fair. No email contact details are provided, but a telephonic query was quickly and helpfully dealt with.
Resolution Rationale Vote Outcome
of AGM
Ordinary Resolutions
1 To receive and adopt the audited It is pleasing to be presented with the AFSs for adoption; far to many FOR FOR
Annual Financial Statements (AFSs), companies no longer present these for adoption or discussion. 100%
including the Directors’ Report and The auditors have issued a clean audit opinion and we support the
the Audit Committee Report, for the adoption of the AFSs.
period ended 30 June 2019
2 To re-elect by separate resolutions the Diversity and transformation in the boardroom ensure balanced decision-making
retiring directors who are available for and that the needs and concerns of our stakeholder groups are addressed so says
re-election (2.1 to 2.4), and to elect the the chairman in his report. The issues of diversity and tenure were
as an executive director of the spoken to by the company at the 2018 AGM after this was raised in
Company (2.5), and to elect as a non- public, the company stated In this regard, the board will aim to ensure that at
executive director (2.6): least 30% of the board of the company will comprise of both black and female
directors within the next 12 to 18 months. It now states: During the 2017
reporting period the voluntary target set by the board was that at least 10% of the
board of the company should comprise females in the short term, and that at least
30% of the board of the company should comprise females in the medium term. It
makes the same statement and targets for racial diversity. The Report
concludes that the company has achieved its short-term target for race diversity
and concludes that it has met its target for female directors.
The setting of targets is required under King IV so we are pleased that
targets are set but the statements are confusing.
The report provides the following information (2018 comparative):
Age: Non-exec average 63yrs (65), Exec average 57 yrs (58);
Tenure: Non-exec average 11yrs (11), Exec average 10yrs (12),
in addition we are provided with detailed tenure (indep
directors): 10yrs – 56%
Independence: Indep. Non-Exec. 69% (73), Exec. 31% (27)
Diversity: This was not provided this year
A detailed graphic is also presented of directors and skills mix.
Unpacking the above we note the following:
Age (Non-exec only): 75yrs – 12.5% (12%).Resolution Rationale Vote Outcome
of AGM
Age (execs):Resolution Rationale Vote Outcome
of AGM
2.1 Mr RG Dow Mr Dow, 62, is suitably skilled and experienced. He has been a director AGAINST FOR
for 21 years and no other significant directorships are listed. 86.0%
Mr Dow’s attendance record in the year under review was impeccable.
The Report on Corporate Governance and Application of King IV
Principles states that the independence of directors has been
considered by the board and the board considers all independent
directors to be independent.
Despite this assurance, given our concerns regarding independence of
the board and the fact that Truworths is the only listed directorship
which Mr Dow has, his independence is questionable and we therefore
oppose his reappointment.
2.2 Mr MA Thompson Mr Thompson, 76, is suitable skilled and experienced, his attendance AGAINST FOR
record for the year is acceptable. 88.2%
However, he has been a director for 15 years and as with Mr Dow we
consider his independence to be questionable.
Mr Thompson as chair of the Social and Ethics Committee has put
forward a report which is most inadequate (see 9 below).
2.3 Mr DN Dare Mr Dare, 58, is an executive director. FOR FOR
We do have a concern that at 33% the number of executive directors is 99.4%
excessive but this is insufficient reason at this stage to oppose Mr
Dare’s reappointment.
2.4 Mr RJA Sparks Mr Sparks, 60, is suitably skilled and experienced and his attendance FOR FOR
record for the year is acceptable. 99.7%
He is a director of 2 other listed companies and has been a director of
the company for 7 years.
2.5 Ms SJ Proudfoot Ms Proudfoot, 51, an executive director is newly appointed to the FOR FOR
board. As with Mr Dare above, we are concerned at the number of 99.4%
executive directors but at this point this is insufficient reason to oppose
Ms Proudfoot’s appointment.
2.6 Ms CJ Hess Ms Hess, 43, is a new appointee to the board. She is suitably skilled and FOR FOR
experienced and is a director of 2 other listed companies. 100%
As a new appointee it is not possible to properly assess her attendance
record.Resolution Rationale Vote Outcome
of AGM
3 To renew the directors’ limited and We are opposed to any general authority to issue or sell shares for cash. FOR FOR
conditional general authority over the However, the company has set out clearly the limit to this authority 91.9%
unissued and repurchased shares, (5% of issued shares), the minimum price that would apply to any issue
including the authority to issue or (a discount of no more than 10% of the average price) and most
dispose of such shares for cash importantly the limited circumstances under which the directors may
exercise this authority – for an acquisition or for a BBBEE transaction.
In general, we would still prefer to have specific resolutions for any
issue but recognise the need to take advantage of opportunities as and
when these may arise.
Special Resolution:
4 To give a limited and conditional A broad and sweeping resolution for the repurchase of shares in the AGAINST FOR
general authority for the company or company subject only to a maximum repurchase of 5% of the issued 98.1%
its subsidiaries to acquire the share capital at a price no greater than 10% above the average price.
company’s shares The company does not appear to have any intention nor is there any
likelihood that it will repurchase shares.
The reasons and effect of the shares as stated in this special resolution
are not proper reasons or effects.
Ordinary Resolution:
5 To re-elect Ernst & Young Inc. as Ernst & Young are one of the big international audit firms and are FOR FOR
auditor in respect of the Annual capable of performing the audit of the company. 76.3%
Financial Statements to be prepared However, they have been auditors for 44 years and as such their
for the period to 28 June 2020 and to independence is questioned. The Audit committee have taken note of
authorise the Audit Committee to the impending required auditor rotation and state: The committee
agree the terms and fees considered and agreed to embark on a tender process for external audit services
during the course of the 2020 financial year, with a view to a change in auditor
ahead of the mandatory auditor rotation date.
We commend the committee’s decision to embark on the rotation
prior to the mandatory rotation and given the decision to embark on
the tender in the coming year, we support the reappointment of Ernst
& Young for a further year.Resolution Rationale Vote Outcome
of AGM
Special Resolution:
6 To approve by separate resolutions The report states that salary increases ranged from 5.75% for
the proposed fees of the non- executives to 6.45% for other staff. The increases of 3.2% to 89.5% for
executive directors for the 12-month non-executives therefore appear to be inappropriate at the upper end,
period from 1 January 2020 to 31 this after increases that were above salary increases and inflation for the
December 2020: past two years.
The average director fees for the company increased from R 172 833 in
2008 to R 621 625 in 2019 an increase of 360% during which time the
profit before tax decreased from R 1 880 000m to R 1 569 000m.
Directors’ fees are not extraordinary for a company the size of
Truworths, however if they are inappropriate then this must be
addressed, properly motivated, and set at the appropriate level. High
increases for at least 3 years without proper motivation is not
acceptable.
Fee increases are disproportionate to the results of the company and
out of line with increases to salaries and executive increases.
6.1 Non-executive chairman The fee increases 9.7% after increases in the last 2 years of 6% and 9% AGAINST FOR
99.7%
6.2 Non-executive directors The fee increases 11.1% after increases in the last two years of 5% and AGAINST FOR
3%. Previous increases have been low, however we oppose on the 99.6%
grounds that there is no attendance fee.
6.3 Audit Committee chairman The fee increases 20.7% after increases of 7% and 6% in the last two AGAINST FOR
years. 99.7%
6.4 Audit Committee member The fee increases 4.6% on top of the last two years increases of 6% AGAINST FOR
and 7%. 100%
6.5 Remuneration Committee chairman The fee increases 5.5% after last year’s increase of 4%. FOR FOR
100%
6.6 Remuneration Committee member The fee increases 3.2% after increases of 6% for 2 consecutive years. FOR FOR
100%
6.7 Risk Committee member (non- The fee increases 15.8% after increases of 6% for 2 consecutive years. AGAINST FOR
executive only) 99.7%Resolution Rationale Vote Outcome
of AGM
6.8 Nomination Committee chairman The fee increases 5.2% after increases of 5% for 2 consecutive years. FOR FOR
These are acceptable increases. 100%
6.9 Nomination Committee member The fee increases 5.2% after increases 5% and 8%. FOR FOR
These are acceptable increases. 100%
6.10 Social and Ethics Committee The fee increases 50% after increases of 8% for the last two years. AGAINST FOR
chairman A proper motivation must accompany a 50% increase. 99.7%
6.11 Social and Ethics Committee member The fee increases 89.5% after increases of 9% and 17%. AGAINST FOR
(non-executive only) A proper motivation must accompany a 89.5% increase. 99.7%
Ordinary Resolutions:
7 To confirm by separate resolutions The appointment of members of the audit committee is of great
the appointment of the following importance given our concerns regarding the independence of the
qualifying independent non-executive board and the lack of a Lead Independent Director.
directors to the company’s Audit The committee comprises 3 directors listed as independent directors.
Committee for the period until the However, 7 other directors and/or employees attend meetings by
next annual general meeting (subject invitation – seemingly permanent invitation. Many of them should only
where necessary to their re- attend audit committee meetings as and when required. In particular
appointment as directors of the we are concerned that the chairman of the board attends all audit
company) committee meetings – notwithstanding his relevant expertise the
chairman should not attend audit committee meetings – King IV states
quite clearly that the chairman of the board should not be a member of
the audit committee and thus by extension he should not attend such
committees meetings.
7.1 Mr RJA Sparks See 2.4 above re the reappointment of Mr Sparks as a director. We FOR FOR
consider him sufficiently independent and experienced to serve on this 99.5%
committee.
7.2 Mr MA Thompson See 2.2 above. We do not consider Mr Thompson sufficiently AGAINST FOR
independent to serve on this committee. 71.7%
7.3 Mr RG Dow See 2.1 above. We do not consider Mr Dow sufficiently independent to AGAINST FOR
serve on this committee. 70.1%
8 To approve by way of separate non- The 2018 AGM was not enthusiastic about the Remuneration Policy or
binding advisory votes the Group’s the Remuneration Implementation reports which were passed by 75%
remuneration policy and and 79.7% of shareholders. The report states management engagedResolution Rationale Vote Outcome
of AGM
implementation report as set out in informally with a range of local and international shareholders. As the
the company’s 2019 Integrated Report resolutions were passed by the requisite 75% of shareholders, the
company was not obliged to consult with shareholders, however
having had such engagement more details should be provided.
The Report does detail changes made as a result of those consultations.
The remuneration consultants are named but their fees and brief are
not detailed.
The Remuneration Committee (Remco) comprises 3 independent
directors, however we question the independence of all of them as they
have served as directors for 21 years, 16 years and 20 years respectively,
in the case of the last of those part of that time was as an executive
director.
The CEO attends the meeting by invitation but recuses himself when
his remuneration is discussed, we do not favour standing invitations for
executive directors.
An independent benchmarking exercise of remuneration was
undertaken during the year.
We are pleased that malus and clawback provisions will be introduced.
8.1 Remuneration policy Base pay or Guaranteed Pay is benchmarked annually using external AGAINST AGAINST
consultants, the companies used in the benchmarking exercise and the 32.7%
external consultants are named in the Report.
Short-term Incentives (STIs) are determined by targets set by the
Remco, however they have the discretion to vary incentive payments to
mitigate unintended consequences that may arise from a purely formulaic approach.
STI financial targets are based primarily on EBIT and no STI is paid if
base EBIT target is not met. Base, Target and Stretch EBIT are set in
advance by the Remco and this determines the bonus pool.
STI performance modifiers include return on assets (ROA), gross
margin, cash realisation rate and short-term strategic goals.
Individual performance is measured with reference to a scorecard of
metrics to encourage all participants to focus on both the financial
and non-financial performance targets.Resolution Rationale Vote Outcome
of AGM
We are provided with the value relative to Guaranteed Pay of the CEO
and other executives payable under the STI scheme at base, target and
stretch levels. However, no details are provided of the EBIT target, the
modifier targets or individual performance targets.
Long-term Incentives (LTIs) comprise share schemes aimed at
retention of executives and performance awards aimed at rewarding
executives for the creation of shareholder value over the medium to longer term.
There are a total of 5 share schemes which seems a bit excessive. The
total shares which may be allocated in terms of all the schemes is 10%
of the issued share capital in 2012, with a cap of 2.4% for any one
individual, a high number of shares.
Annual LTI awards at face value are capped at 110% to 130% of
guaranteed pay.
No details of targets and vesting periods are provided under the policy
report.
The report is short on detail with no information on the LTIs and very
little on the STIs. We are particularly concerned that there is no
information whatsoever on the modifiers to the STI and that targets
such as customer satisfaction, social and sustainability targets are not
even mentioned.
8.2 Implementation report The Report states that management increases were 5.75%, however the AGAINST FOR
4 executive directors increases were 3.1%, 11.7% and 3%. The 4th 80.1%
director’s increase is not listed presumably because she was only
appointed a director in May 2019, this was before year-end and her pay
should have been included. The increase of 11.7% was as a result of
increased responsibility and promotion from CFO to COO in terms of
the groups succession planning.
No STIs were payable as the EBIT target for the group was not met.
The targets for LTIs for the year of EBIT and ROA were not met so
applicable shares did not vest.
Benefits comprising interest on loans pursuant to the 1998 share
scheme, subsistence allowances for local and overseas travel, long-
service awards and fringe benefits on life insurance premiums paid,Resolution Rationale Vote Outcome
of AGM
amounted to more than 35% of the CEOs base pay, as such more
detail should be provided.
As with the Remuneration Policy Report the Implementation Report is
short on detail.
In addition to our concerns regarding the appropriateness of targets,
we are concerned that management were not paid any STI or LTI. This
indicates there must be problems either in execution or in setting
targets.
9 To consider the report of the Social At less than 2 pages, and approximately 1 500 words this report is not AGAINST FOR
and Ethics Committee for the period very informative. 100%
ended 30 June 2019 as published on The report is also remarkable in that it provides no detailed
the company’s website information at all but sets out in detail the responsibilities of the
committee and how often they met etc. As an example of its lack of
information, it refers a number of times to the work the company is
doing on the BBBEE scorecard but does not give the scores attained
and what action is being taken in this or other matters.
A wholly inadequate report.
10 To confirm the appointment of the As noted above the Social and Ethics Committee report is inadequate.
following qualifying directors to the As such we take a dim view of serving members of this committee.
company’s Social and Ethics
Committee for the period until the
next annual general meeting (subject
where necessary to their re-
appointment as directors of the
company):
10.1 Mr MA Thompson We opposed Mr Thompson’s appointment to the board on the basis of AGAINST FOR
our concerns regarding the independence of the board and this is 93.7%
sufficient reason to oppose his appointment to this committee.
However, his report on behalf of the committee is unacceptable in its
lack of information.
10.2 Ms M Makanjee Ms Makanjee is a new appointee so her appointment is supported, we FOR FOR
trust a new director can bring some energy to this committee. 99.7%Resolution Rationale Vote Outcome
of AGM
10.3 Mr DB Pfaff Mr Pfaff has served on this committee for a number of years and given AGAINST FOR
the poor quality of the report this year and last year we favour a new 99.6%
executive to serve on this committee.
Special Resolution:
11 To approve the provision of financial This resolution is to empower the directors to make loans or provide AGAINST FOR
assistance by the company, as guarantees to any group or related company. We recognise the need for 99.4%
authorised by the board, to Group the resolution but unfortunately insufficient detail is provided, in
entities in accordance with the Act particular no reference is made to the terms and conditions which will
apply to such loans or guarantees.
AGM Outcome
The AGM was well attended with 80% of the shares present in person or by proxy.
All resolutions other than the advisory vote on remuneration policy were approved, the company is obliged to enter into consultation with
dissenting shareholders on the remuneration policy. The 2018 remuneration policy report was only approved by the minimum number of
shareholders and the committee should have taken note of this resistance. The remuneration implementation report was approved but with a fair
degree of opposition.
Messrs Dow and Thompson as two of the long standing directors were not enthusiastically reappointed as directors or members of the audit
committee, with 12% to 15% opposition to their reappointment as directors and 30% opposition to their reappointment to the audit committee.
Surely the company will take notice of this opposition.
The auditors have served for too many years and as such there is a lot of resistance to their reappointment, we note that the company has
committed to a tender process to appoint new auditors.You can also read
