Lewis executive pay set to return to spotlight at AGM

Johan Enslin.

Picture: Business Day

That record may be broken at 2016s Lewis AGM, scheduled for August, as shareholders express their increasing frustration at the continued absence of details to justify multimillion-rand remuneration packages.

Their frustration will be heightened by the more than 40% collapse in the share price since the 2015 AGM.

Earlier this week, two of the executive directors of the troubled furniture retailer, Johan Enslin and Les Davies, were granted share awards worth several million rand.

The SENS statement shows the shares were granted (at no cost to the executives) in terms of the company’s long-term and short-term performance scheme, "subject to the achievement of performance targets".

There are no details of which targets have to be met before the two executives get ownership of the shares other than they are based on headline earnings per share, quality of the debtors’ book and gross margin.

Shareholders will struggle to find anything more useful in the recently released annual report.

In 2015, the Public Investment Corporation, which holds 9.4% of Lewis, said it had voted against the remuneration policy, because the company had not weighted the financial and operating targets, and had failed to disclose any sustainability targets.

Dave Woollam, a shareholder activist who recently instituted a Section 165 action against Enslin and Davies, said it was impossible to determine from the annual report whether the executives deserved their bonuses.

"The bonus payments disclosed in the financial 2016 report relate to the achievement of performance targets in the 2015 financial year," Woollam said.

In financial 2016, Enslin received a bonus of R2.9m for the achievement of targets in the previous year. He received an additional R3.6m for achieving three-year targets set in 2012. This was topped up by a R2m payout from the company’s coinvestment scheme. The total value of remuneration package paid to Enslin in 2016 was R12.7m, of which R8.7m related to financial 2015.

Woollam said a major danger with this lagged disclosure was that it was impossible to hold the remuneration committee to account for the awards it had made. "This committee has the discretion to alter vesting conditions, and does so without explaining why," Woollam said. The 2016 remuneration report shows that despite the company not achieving the net profit before tax target in 2014, the executives were awarded the full award for the three-year performance.

The Lewis board has had an extremely tough two years, with new regulations and weak economic conditions combining drastically to change its operating environment.

While the resulting pressure might be used to justify generous remuneration, the policy’s design and lack of transparency points to a conflict between the interests of the executives and shareholders. During 2016, the Lewis share slumped from a high of R100 to a low of R39, and for the past three years, the dividend payout has remain unchanged at 517c a share.