Paarl - Pioneer Food Group
[JSE:PFG] chairperson
KK Combi on Friday defended his executive team when asked by shareholders whether directors had been appropriately punished for the firm's role in the recent price-fixing saga.
Pioneer was slapped with massive fines last year for colluding in fixing prices in the bread and milling sectors. Although the worst-case scenario fine of R2.1bn was avoided, Pioneer still had to fork out about R850m in fines.
Responding to a question from shareholder activist Theo Botha at its annual general meeting, Combi said weighing up punishment for executives was "a complex question".
Botha pointed out that Pioneer's annual report stated that 41 employees had endured disciplinary hearings around price collusion.
He wanted to know whether the company's executives – led by CEO André Hanekom – had also been subject to disciplinary hearings.
"Where does the responsibility lie with executives?"
Combi reckoned it would have been catastrophic for Pioneer to have gone beyond the punitive measures meted out to executives – which included the loss of bonuses and options worth R20m and placing a freeze on salary increases.
"It would have destroyed value, destroyed jobs, created instability not only in the company but also in the local agricultural sector," he said.
While many observers have called for heads to roll at Pioneer after the price-fixing debacle, market watchers argued that Pioneer could not afford to lose Hanekom or any of his executive team.
Hanekom, who oversaw the merger of Bokomo and Sasko to form Pioneer in the mid-1990s, is highly regarded in the food sector and has been a prime mover in Pioneer's successful transformation into a diversified food brands.
Combi stressed there was a need to strike a balance between forming a relationship with the competition authorities and, at the same time, looking after shareholder value.
"I take full responsibility for the decision. The executives now have a moral contract with me... they shall rebuild the value that has been lost at Pioneer."
In a trading update, Combi said Pioneer had seen a buoyant festive season.
He said sales in the four months to end-January were 2.3% up at R5.5bn on the back of volume increases of about 5% throughout all Pioneer's business units.
Aside from its core staple foods division (mainly Sasko and Bokomo), Pioneer also owns brands in the dried fruit, soft drinks/fruit juices, sandwich spread, condiments and chicken and eggs categories.
- Fin24