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Johannesburg - Paper company Sappi has been criticised for paying its CEO a R2m bonus for three months' work and not disclosing that this was in fact a sign-on fee.
Sappi's auditors, Deloitte & Touche, were also slammed for disclosing the payment as a bonus.
Speaking at Sappi's annual general meeting on Monday, shareholder activist Theo Botha questioned the payment of a R2m ($204 705) bonus to CEO Ralph Boëttger for the 2007 financial year when he had only been in service for three months (appointed in July 2007) of that financial year.
Botha compared Boëttger's bonus with the R1.8m ($180 552) bonus awarded to chief financial officer Mark Thompson for the full 12-month period to end-September.
After being pressed by Botha, Sappi's chairperson Danie Cronjé explained that the R2m was not a bonus but a sign-on fee.
David Brink, the chairperson of Sappi's compensation committee, said when Boëttger was employed "there were certain arrangements made".
"Bonuses are incentive payments; some are performance-related and other are for other reasons," he added. He also said comparing the two individuals' packages "was not valid".
Botha said that this should have been disclosed in financial 2007 and not classified as a bonus: "The payment took place in 2007 but there was no mention of this. Sappi is not being open, honest and direct with its shareholders," Botha told Fin24.com after the meeting.
Botha also said there were not enough executives on Sappi's board. In his opinion only two directors have experience in manufacturing - Nigel Rudd and Karen Osar. Cronjé said: "To find directors of that calibre and to fill those jobs on the committee is extremely difficult."
Mum on M-Real
Botha also implored the Sappi board to disclose the most recent six-month losses by Sappi's European acquisition, M-Real.
Profits at M-real, the Finnish graphic paper producer bought by Sappi in December 2008, fell by a third for the last three months of 2008, the company reported on February 5.
M-real's sales dropped by 12.6% to €722m in the last three months of 2008 when compared with the prior quarter. M-real said this was due in part to reduced demand for its products, especially in North America and Europe.
Earnings before interest, taxes, depreciation and amortisation fell 36.2% to €254m.
Boëttger said the Sappi board did not have any access to information pertaining to the performance of these mills. "We are not disclosing how we are performing per mill," said Boëttger, but the board said the mills were performing in line with its expectations.
Sappi released a trading statement on Monday saying that since the end of the first quarter it had not seen any improvement in market conditions and that it expected an operating loss before special items for the quarter to March 2009.
Cronjé said Sappi had "experienced lower demand than expected as well as weaker pricing in some markets as global market conditions continued to deteriorate."
Sappi's share price plunged by 10% on Monday to close at 1 700c. The share price has halved over the last month.
All resolutions proposed were passed, including a resolution to place 25 million Sappi shares (constituting just over 4.6% of its issued share capital) under directors' control.
- Fin24.com
