Amid Sasol’s woes, its directors coined it – earning in dollars, with ‘outrageous’ travel fees
- Ahead of a shareholder vote, Sasol cut its chairman and director fees.
- Its fees – which since 2018 are dollar-based, despite most directors being in South Africa – have seen large increases in recent years, according to a shareholder activist group.
- This at a time that the company took some disastrous decisions, landing it with a large debt burden.
- For more articles, go to www.businessinsider.co.za.
In a pre-emptive move, Sasol announced on Wednesday that its chairman and twelve non-executive directors will get 20% less this year than it previously proposed – given the “significant challenges still facing Sasol and in acknowledgement of the erosion of shareholder value over the past two years".
Shareholders are supposed to vote on director pay on Friday, and given that their investment in Sasol lost 60% of its value so far this year, they may not be in a generous mood. Also, according to some critics, these directors have been earning excessive fees.
“We note this cut does not apply to committee fees nor does it apply to outrageous travel fees of up to R260,400 per board meeting," says Mike Martin, head analyst for Active Shareholders. “We would have been much happier if Sasol had taken the decision to cut fees because it was the right thing to do, rather than because it was forced on them by the realisation that the resolution may not be passed by the shareholders.
In a recent report, Active Shareholders, a not-for-profit company that advises shareholders, outlined its objections to Sasol’s director fees:
Large pay hikes: Over the past decade, the chairman fees increased by 106% - far outpacing the SA inflation rate of 67% over the same time. South African-based directors saw an increase up 680% in this time.
Dollar-based fees: In 2018, Sasol moved all its directors to dollar-based fees despite the fact that the majority of directors are based in South Africa, says Martin. This has added to the large fees.
In the previous year, the Sasol chairman earned $445,000 (R6.9 million, at current exchange rates), while non-executive directors received $150,000 (R2.3 million). They would also get between $11,000 and $20,000 for serving on different committees.
Travel allowances: In addition to the fees, non-executive directors are paid an allowance based on the travel time to their destination, according to Active Shareholders. At the exchange rate at the financial year-end the fees vary between R86,800 ($5,000) and R260,400 ($15,000), if the director travelled for more than 15 hours.
“This fee we are told is a travel fee which is to compensate for the inconvenience, as well as all costs associated with the travel to South Africa excluding the flight and accommodation costs which are covered by Sasol.”
Martin notes that this travel allowance exceeds the company’s minimum annual wage of R 221,146.
“The proposed out-of-town allowance which will be payable to non-executive directors is a significant increase in their fees and the allowance for one trip will exceed the annual wage of a worker.”
Active Shareholders calls out Sasol for being part of Business Leadership South Africa’s campaign to halt government salary and wage increases, while its non-executive directors have been receiving “excessive” fee hikes over the past decade.
Sasol staff will see no salary increases this year as the company battles a massive debt burden triggered by its disastrous Lake Charles Chemicals Project in the US.
This week, Sasol announced that the last of its seven units was finally brought into operation, years later than planned. The LCCP cost $12.8 billion – almost $4 billion more than the original budget of $9 billion.
An independent investigation into the LCCP found inappropriate conduct and incompetence in its project management team. It also found "an improper tone at the top of the LCCP", and that managers didn't provide accurate cost and schedule estimation to executives. Sasol's joint CEOs, Bongani Nqwababa and Stephen Cornell agreed to resign, but still received final packages of R27 million, and R69 million, respectively.
“Given the poor performance of the company, many shareholders will be forgiven for considering these packages to be rather generous,” says Active Shareholders.
Last month, Sasol announced it would sell 50% of key Lake Charles assets to LyondellBasell Industries.
Compiled by Helena Wasserman
READ | A billion here and a billion there: how Sasol came to sell 50% of its Lake Charles megaproject
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