The Public Investment Corp., Africa’s largest fund manager, voted against some of Investec Plc (INVP)’s proposals in protest over its acquisition strategy and executive pay after the company’s returns lagged peers.
The state pension fund voted against a plan to allow the bank and money manager to issue shares at an annual meeting last week because of Investec (INL)’s “poor acquisition track record,” Deon Botha, corporate governance specialist at the Pretoria- based PIC, said in an e-mailed response to questions today. The PIC also opposed resolutions relating to compensation “due to the past couple of years’ exorbitant remuneration,” Botha said.
Shareholders vetoed three resolutions seeking to give Investec the authority to issue shares that could be used for acquisitions at the meeting on Aug. 2. Since Investec started trading in the U.K. in 2002, it has spent 734 million pounds ($1.14 billion) on three all-stock acquisitions, including the 2007 purchase of subprime mortgage provider Kensington Group Plc. Investec incurred writedowns after the mortgage-backed securities market collapsed.
“Whilst the timing of Kensington was unfortunate, the business has generated cumulative profits since acquisition,” Ursula Nobrega, Investec head of investor relations, said in a statement today. “Rensburg Sheppards and Evolution in our view are very good businesses and place us in the top five largest private client fund managers in the U.K.,” Nobrega said, referring to two other acquisitions.
“The resolutions that were not passed do not hinder our ability to make acquisitions,” Nobrega said. “Our focus is currently on organic growth.”
Investec Chief Executive Officer Stephen Koseff was South Africa’s best-paid banker in 2011, receiving 3.4 million pounds, excluding share awards. Investec’s return on equity dropped for a fifth consecutive year in fiscal 2012 to 7.8 percent, the worst among South African banks. Koseff’s compensation fell by 87 percent for fiscal 2012 after the company cut his pay and he asked not to receive a bonus. Investec’s compensation report was approved at last week’s investor meeting.
While all directors were re-elected to their posts at Investec’s annual general meeting, the PIC voted against the re- election of Investec’s remuneration committee, Botha said. The PIC, with about 1 trillion rand in funds under management, holds more than 14 percent of Investec, according to data compiled by Bloomberg.
In fiscal 2012 “three of the executive directors received zero bonuses and two received zero salary increases and in addition, awards under the share matching plan have been forfeited for the executive directors as the earnings per share performance conditions have not been met,” Nobrega said. In the past decade, total pay for Koseff, Managing Director Bernard Kantor and Glynn Burger, the finance director, has declined by 3.3 percent on a compound annual growth basis, she said.
Investec has risen 14 percent in Johannesburg this year, while the six-member FTSE/JSE Africa Banks Index has increased 24 percent. Investec’s 16 percent gain in the U.K. has outperformed the FTSE 350 Banks Indexes’ 10 percent increase. The shares rose 0.8 percent to 50.25 rand as of the 5 p.m. close in Johannesburg.
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