Theatre+of+the+absurd,+Liberty+Holdings,+Ann+Crotty,+Business+Report

Business Report, Johannesburg, May 24, 2006
=Theatre of the absurd: Liberty Holdings=


 * By Ann Crotty**

There's something delightfully subversive about the notion of Liberty Holdings' remuneration committee. Here we have a listed company that has no employees, and yet, has a remuneration committee. And not just any old remuneration committee. No, this particular committee consists of three individuals who rank among the most senior individuals in South African corporate life, namely Buddy Hawton, Derek Cooper and Saki Macozoma.

Could it be that the guys at Liberty Holdings are attempting to highlight the absurdity of the corporate governance requirements set out by the King 2 report and thereby hoping to subvert the whole corporate governance thing? The alternative, namely, taking this remuneration committee seriously, is just too ridiculous to contemplate.

According to the Liberty Holdings' annual report, its remuneration committee meets once a year "with additional meetings scheduled as required".

You can just imagine the three members sitting around a desk at their annual meeting whiling away the hours, or probably just minutes, contemplating the futility of it all. It would surely be something like the corporate equivalent of Samuel Beckett's famous play about the absurdity of life - Waiting for Godot? Indeed given that this year is Beckett's 100th anniversary and an occasion that is being celebrated around the world, could it be that the continued existence of Liberty Holdings and its remuneration committee is, in fact, part of the worldwide anniversary celebrations?

And just as Estragon, one of the two main characters in Beckett's play, says to his friend Vladimir: "We always find something, eh Didi, to give us the impression we exist?" the members of the Liberty Holdings remuneration committee have also found something to give them the impression they exist.

Thus, the annual report states: "As Liberty Holdings does not employ any personnel, the overall purpose of the remuneration committee is to formulate remuneration policies for the non-executive directors for approval by the board and to monitor the implementation of such policies and report thereon to the board, thereby enabling the board to discharge its responsibilities." How absurd.

That Liberty Holdings has no executive directors highlights the fact that it has no apparent reason for existing, other than to serve as a crucial cog in the pyramid structure that ensures Standard Bank can control Liberty Group.

If you happen to be Standard Bank and feel that you may have paid too much for your stake in Liberty a few years ago, then it is perhaps understandable that you would want to ensure that you have as much control over Liberty as you are allowed. And in terms of the JSE, you are allowed a lot.

Although the exchange's current regulations do not allow pyramid structures to be listed, the view of the exchange is that pyramids that existed prior to the introduction of these regulations cannot be forced to delist as that would be tantamount to retrospective regulation and would be unfair.

So then what we have are the bizarre results of a pyramid company applying the corporate governance recommendations of the King 2 report, which were not designed for application to a pyramid company, but which are required by JSE regulations to be implemented by all listed companies. And anyone who thinks that the King recommendations are a waste of time, effort and money for even your average listed company, will be positively thrilled by the totally ridiculous situation that arises when these recommendations are applied to a pyramid company.

Applying the King recommendations to Liberty Holdings means that this dividend conduit not only has to have a remuneration committee but also an audit committee as well as an "appropriate" process for inducting new directors.

And so in the absence of any employees or executive directors, the remuneration committee spends its time determining what the non-executive directors of this company should be paid. Thus, "when determining the fees for non-executive directors for recommendation to the board, the remuneration committee reviews data on directors' fees for the financial services sector and companies of a similar size outside of the industry". That this rigorous comparative study is undertaken despite the fact that Liberty Holdings would seem to be one of a kind, and defies comparison, does indeed reflect a commendable commitment to the box-ticking obligations that flow from the King recommendations.

But before we get carried away in our enthusiasm for Liberty Holdings' commitment to the notion of corporate governance at all costs, it should be pointed out that it does seem to be playing hard and fast with the definition of independence. In terms of the King recommendations, the majority of non-executive directors on a board should be independent. In this instance, independence would largely be defined in relation to Standard Bank. In line with the recommendation, Cooper, Hawton, Martin Shaw and Alan Romanis are deemed to be independent. The other two board members, Jacko Maree and Macozoma, are not independent.

However, with the exception of Romanis, who in many jurisdictions would not qualify because he has been on the board for 20 years, the other three so-called independent directors are on the main board of Standard Bank. In fact, Derek Cooper is chairman of that board. In terms of the King report's definition of independent, this would certainly seem to preclude Cooper, Hawton and Shaw from qualifying as independent. The independent directors, however, argue that they are on the board in their personal capacity and not as representatives of Standard Bank.

And who are we, watching from the cheap seats as this corporate drama plays out, to question the absurd antics of some of the most powerful players in our theatre?


 * From: http://busrep.co.za/index.php?fSectionId=553&fArticleId=3259071**

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