Background: South Africa is a corporate governance pioneer. The King Reports have offered guidance to listed companies in the country since 1994 and unlisted entities since 2016. In the drive for corporate change, attention is increasingly placed on the role of activist shareholders, in particular institutional investors, given the size of their investments. Purpose/objectives: This study aimed to gauge institutional investors’ views on the differences between the King III and IV Reports related to positive aspects and room for improvement. Design/methodology/approach: Semi-structured interviews were conducted with selected institutional investors. Themes were then derived by conducting an interpretive thematic analysis. Findings: Interviewees commended the format and scope of the latest King Report but suggested that outcomes-based training should be offered to directors to ease implementation. Executive remuneration, director independence and auditor independence were highlighted as areas that require attention. Some interviewees questioned whether the current non-binding vote on executive remuneration is sufficient. They suggested that executive remuneration should be tied to performance outcomes across the triple bottom line. Participants recommended that director independence should be considered on a case-by-case basis, instead of strictly applying King IV’s suggested tenure guideline. Furthermore, mandatory audit firm rotation could enhance auditor independence, and hence transparency. Stakeholders are encouraged to demand enhanced transparency on corporate matters to enable more informed decision-making.
Loop, Bromilow and Malone (2018) remarked that 'activism is about driving change'. Shareholder activists could accordingly use their ownership position to influence the policies and practices of Background: Investors around the globe are increasingly focusing on investing in a responsible manner by accounting for environmental, social and corporate governance aspects alongside financial performance. Shareholder activism is a prevalent responsible investment strategy that is gradually gaining traction among South African investors.Aim: The primary objective was to gauge the views of selected local institutional investors on the nature of shareholder activism endeavours in South Africa. The secondary objective was to offer suggestions on the way forward for shareholder activism considering rapid technological development and the COVID-19 pandemic.Setting: South Africa offers a well-developed framework for responsible investors. Given their substantial shareholding, institutional investors in particular have considerable power to influence the practices and policies of investee companies.Method: Semi-structured interviews were conducted with 13 representatives of local institutional investor organisations. Thematic analysis was conducted to analyse the primary data.Results: Interviewees mostly engaged in private with investee companies on corporate governance issues. They explained that more information is required to meaningfully engage on social and environmental considerations. Participants indicated that they consider and employ public activism mechanisms if private engagements are deemed unsuccessful. Conclusion:Technology will play an increasingly important role to enhance shareholder activism in future, but also offers various challenges. Although social media might be a valuable avenue to disclose information, it should be cautiously managed. Selective engagement details could be published on institutional investors' and companies' websites to enhance transparency regarding the nature and outcomes of engagements. Virtual and hybrid annual general meetings are likely to enable more shareholders to become active owners in future.
PurposeCompanies around the globe increasingly receive immense shareholder scrutiny due to perceivably excessive executive director remuneration. The debate in South Africa intensifies due to severe pay inequality. The authors thus accounted for the perspectives of asset managers and listed financial services companies in South Africa pertaining to the impact of voting and engagement on director pay policies and practices.Design/methodology/approachSemi-structured interviews were conducted with selected asset managers, chief executive officers, chief financial officers and remuneration committee members of listed financial services companies to gauge their views on the impact of shareholder activism endeavours on remuneration governance. The qualitative data was analysed by conducting thematic analysis.FindingsMost of the asset managers and financial services representatives preferred proactive, private engagement on pay concerns, given the impact thereof on voting outcomes, and ultimately director remuneration practices and policies. Independent remuneration committees have a prominent role in facilitating engagements with investors to ensure fair remuneration.Research limitations/implicationsThe consequences should be clearer if organisations receive substantial votes against their pay policies and implementation reports. South African regulators can consider the “two-strikes” rule to ensure that action is taken in response to shareholder voting on director remuneration matters.Originality/valueRepresentatives of asset managers and listed financial services investee companies offered valuable insights on remuneration governance deliberations in an emerging market. This in-depth analysis highlights the importance of proactive engagement to ensure that corporate leaders are paid fairly.
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