Steinhoff backs down on extra cash for directors

JOHANNESBURG — Warren Buffett famously said there’s never one cockroach in the kitchen, and this certainly applies to Steinhoff, the once darling of the Johannesburg Stock Exchange. The company has been gripped in an accounting scandal, which hit investors in December last year. CEO Markus Jooste has been labeled as the kingpin, stepping down soon after. The group’s supervisory board put together a team of independent directors to help navigate these troubled waters, which stretch a lot deeper than originally thought. And recently proposed a bonus structure for the independent directors who joined the team post-Jooste. The bonuses were proposed as the directors were seen to have worked beyond the original call of duty, but drew a fire of criticism from all corners. Sense has come to the fore as the bonus discussion has been deleted from the group’s annual general meeting to be held 20 April. The statement saying: “Shareholders have raised concerns, and the issue threatens to become a distraction when the main objective is maintaining as stable an environment as possible to deliver a controlled restructuring programme in the interest of all stakeholders.” The group continues to put out fires, the most recent hammer blow saw the group’s portfolio assets literally halved in value by an independent audit, which saw the stock lose another 10 percent to R3 yesterday, a far cry from the heights it hit in April 2016 of R95. – Stuart Lowman

Steinhoff media release:

The supervisory board of Steinhoff International Holdings NV has taken note of the concerns raised by stakeholders and has decided to delete sections relating to additional payments for independent directors from the resolution on director remuneration which is to be considered at the company’s annual general meeting on 20 April. The company has explained in an announcement that at the request of the independent directors, it will delete from the resolution the proposals for additional compensation for independent directors, and will instead refer these proposals to the new supervisory board to be appointed at the AGM.

Steinhoff acting chair Ms Heather Sonn said the changes had been made at the request of the directors concerned, who did not want the proposal to detract from other critical matters that had to be considered at the AGM.

The headquarters of Steinhoff International Holdings NV.

“There has been a lot of adverse comment and criticism about these proposals, much of it based on a misunderstanding of what was being proposed and why the supervisory board felt the payments were warranted,” she said.

“Shareholders have raised concerns, and the issue threatens to become a distraction when the main objective is maintaining as stable an environment as possible to deliver a controlled restructuring programme in the interest of all stakeholders.”

In the announcement, the supervisory board set out both the reasons for the deletions, and the factors it believed supported the additional payments to independent directors. It said these directors, who were not permanent employees, committed themselves, outside the scope-of-work of non-executive directors – some on an almost daily basis – since the crisis over accounting irregularities enveloped the company in December 2017.

Read also: Taking a closer look at Steinhoff’s board structure: Did it add fuel to the fire?

The letter also stressed that the basic fees proposed for directors were determined after the board had taken professional advice, which it had followed.

“The proposed remuneration was determined with reference to competitors and peer companies as well as considering the need to retain and attract supervisory directors in light of the company’s situation,” the company stated.

The announcement also emphasised the importance the supervisory board placed on the reappointment of independent directors who were helping to steer the company through the crisis, as well as the reappointment of Deloitte Accountants BV as auditors until September 2018.

The independent directors up for reappointment are Dr Steve Booysen, Ms Angela Kruger-Steinhoff, Ms Heather Sonn, and Dr Johan van Zyl. Dr van Zyl headed the Independent Committee of directors appointed in December last year and which has had a crucial role in stabilising the company, negotiating with regulators and creditors to ensure continued operations, and in initiating the process of investigations which will determine what went wrong and who is responsible. The new Supervisory Board nominees also take comfort in retaining the knowledge and experience of some of the directors, in their own decisions to be nominated for the Supervisory board.

The other members of the Independent Committee are Ms Heather Sonn, who is now acting chair of the supervisory board, and Dr Booysen who, as head of the audit committee, interacted with Deloitte on the accounting irregularities.

Steinhoff is registered in the Netherlands, and therefore follows the Dutch system of a supervisory board, comprising non-executive directors, and a management board comprising executive directors.

Read also: Steinhoff: These 6 charts should have alerted the board – Ted Black

“The Independent Committee has also functioned as a link for quick decision-making between the Supervisory Board and the Management Board providing a centre of leadership following the resignation of the CEO, as it simultaneously focused on establishing a sound governance structure. They have interacted with regulators, Parliament, shareholders and other stakeholders, and with bankers and creditors to ensure liquidity for the group and the continued trading of its underlying companies.

“It is crucial for the company and its shareholders that there is continuity in these roles until such time as the stability of the group is reasonably assured,” the statement said.

Referring to the proposed reappointment of auditors Deloitte Accountants BV, the board said the reappointment of the Netherlands-based auditors was for the 2018 financial year, which began in October 2017 and ends in September 2018. The appointment therefore lasts only for five months after the April AGM, and was considered in the best interests of completing the audit effectively, in good time and applying the lessons of the forensic process.

Read also: Steinhoff lessons: Confused board, overpaid CEO sparked mess – Ted Black

“Steinhoff is not opposed to the rotation of auditors, but believes the continuation of Deloitte Accountants BV as auditors until the end of the current financial year in September 2018 is essential.

“One of the company’s main priorities is the expeditious finalisation of audited consolidated financial statements for the 2017 financial year, and the revised statements for the 2015 and 2016 financial years. Deloitte is already involved in these matters, and the appointment of a new auditor midway through a financial year may lead to unacceptable delays in the completion of these statements. This in turn would affect the company’s dealings with all stakeholders, who require the certainty of audited financial statements.

“Audited financial statements are also essential for company as it considers its options for restructuring and the potential retention or disposal of assets to secure its financial position. Decision-making will be facilitated by early completion of the audited statements,” it said.

“With a September financial year-end, the 2018 audit process will start in approximately two months to ensure a timeously completion of the 2018 audit. Subsequent to the 2018 audit, the appointment of an audit firm for the 2019 financial year will be subject to a global tender process.”

The statement concluded with a considered recommendation to shareholders that a measure of continuity, and stability of leadership, with the inclusion of new skills and experience is what is required.

Steinhoff bows to pressure over bonus payments after outrage

By Janice Kew

(Bloomberg) – Steinhoff International Holdings NV shelved a plan to pay director bonuses after lawmakers questioned whether it was appropriate to release extra funds given the retailer has lost more than 90 percent of its market value amid an accounting scandal.

The owner of Conforama in France and Mattress Firm in the U.S. was planning to ask shareholders to approve payouts to boardmembers including Chairman Heather Sonn as a reward for their work trying to keep the company afloat. Steinhoff shares plunged in December after the retailer reported accounting irregularities, prompting urgent attempts to shore up the balance sheet and appease lenders.

South African lawmakers urged Steinhoff not to pay the bonuses last week, in light of the value lost to investors. Shareholders of the Frankfurt- and Johannesburg-listed company are to meet on April 20 in Amsterdam to vote on a range of proposals including the appointment of a supervisory board.

“It is apparent the motivation behind the proposals for additional one-off payments and for additional meetings has not been fully communicated,” Steinhoff said in a statement Thursday. “It should be noted that the directors concerned contributed significant time, in some cases on a daily basis for weeks on end up until the present day.”

Crisis Team

The company was planning to pay Steve Booysen, who has been a Steinhoff director since 2009, an extra 200,000 euros ($245,180). Sonn and fellow board member Johan van Zyl were due to be paid 200,000 euros and 100,000 euros, respectively. The trio are part of a crisis team put together by Steinhoff to help resolve the challenges caused by the scandal, though all three were on the board while the events that led to the crisis took place.

Steinhoff and former Chief Executive Officer Markus Jooste, who quit in December, are being investigated by numerous regulators and law authorities around the world. PwC is probing Steinhoff’s finances, with a particular focus on off-balance-sheet structures and third parties.

Read also: SHOCKER! Steinhoff gave SA police a dud report with no material information

While Booysen, Sonn and Van Zyl requested that their bonus plans be removed from the AGM agenda, the payments could yet be reconsidered “at an appropriate time” by a newly constituted supervisory board and its remuneration committee, Steinhoff said. Meanwhile, the reappointment of the directors is “essential for the recovery of the company and its future restructuring.”

The retailer will also ask shareholders to approve the reappointment of Deloitte LLP as auditors for the 2018 financial year, which starts in about two months. Deloitte triggered the share price slump when it refused to sign off on the 2017 accounts, though it has been criticized for approving financials for the two previous years that now have to be restated.

Bruno Steinhoff, the 80 year-old who founded the company in 1964 and retired from the supervisory board on Feb. 28, has reduced his holding in the company to 3 percent, from 4.57 percent as of Dec. 14, according to a filing made to the Netherlands’ Authority for the Financial Markets on Wednesday.

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