Oil Pay: Sasol decision on earnings for executives draws criticism

THE decision by Sasol’s remuneration committee to change the key performance indicators (KPIs) for executives to reduce the weighting of company earnings, in a year when Sasol’s earnings were hit by a slump in oil prices, came under fire at the group’s annual general meeting (AGM) on Friday.

 

In the year to June, the influence of company earnings in determining executives’ short-term incentives was reduced to 35% from 55% last year. Sasol’s headline earnings a share fell 17% in this period compared with last year.

According to the annual report, the net base salary earned by CE David Constable — who, as an expatriate, is paid in dollars — rose 4% to $935,618 this year from $899,633 last year, while his net short-term incentives fell 40% to $1.03m from $1.7m.

Shareholder activist Theo Botha asked why the earnings weighting had been reduced and whether it would be cut again in the current financial year. He said after the meeting that although executives earned slightly less overall, the fact that their long-term incentives were 100% or more of their basic salaries, while the firm had shed 2,500 jobs and was driving cost savings across the business, was sending the wrong message.

Henk Dijkgraaf, chairman of Sasol’s remuneration committee, said the change in KPIs was made at the request of shareholders, to reduce the weighting of macroeconomic factors beyond the control of management. In the current year, the earnings weighting would reduce to 30%.

Muhluli Ncube, representing the Sentinel retirement fund, also asked about the board’s progress in seeking a successor for Mr Constable, who steps down as CE in May, but remains as a consultant. He asked whether another expatriate would be employed at great cost, and whether Mr Constable would continue to receive the same expensive package as an adviser that he had as CE.

Sasol chairman Mandla Gantsho said the search for a replacement for Mr Constable was both internal and external.

 

The goal was to find the best candidate for the job and it could be a local or an expatriate.

"We believe we are remunerating our executives for the value they add to the company. After Mr Constable becomes an adviser, his remuneration will not be the same as he received as CEO. It will be significantly less, but will reflect the responsibility that we give him. He is executing a mega-project in the US that will come online in two years, so it is prudent to retain his input to oversee it."

Sasol shareholders voted 93.3% in favour of the remuneration policy and 6.7% against.

The Centre for Environmental Rights, before Sasol’s AGM, questioned what steps it was taking to comply with minimum emissions standards after being granted a postponement for compliance with many of the standards that came into effect this year. Mr Botha put the question to the board.

Mr Constable said Sasol had been granted postponements on eight of its 30 emissions licences. The company had drawn up a road map for compliance as well as a plan for offsets at Secunda and Sasolburg. Over the next five to 10 years, Sasol’s facilities would be 70% compliant with the new standards.