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Cape Town – Naspers CEO Bob van Dijk believes the company’s business model is aimed at hyper-growth and not short-term profits, and said “loyal” shareholders supported the firm’s pay policy.
These were two key issues that had been discussed by market analysts ahead of the 2017 annual general meeting held in Cape Town on Friday.
Watch the full interview, which includes details on where Naspers is heading in under 30 seconds (at the end of the interview).
The first issue was around the $132bn stake that Naspers has in Chinese-based Tencent, which some critics said was outperforming Naspers.
“To judge a hyper-growth internet company by its profitability – it’s a very, very narrow view and it is, I think, a view that does not reflect the value of the company,” Van Dijk told Fin24 and Netwerk24 in an interview in Cape Town.
“To say that profit in a hyper-growth business is a requirement, is indeed a fairly myopic view.”
“Many internet business models require years of investment before they turn profitable. When you decide to accelerate growth, it often costs more money. It is almost inevitable that if you want to build something big, from Day One you will not make money.
“We are now at an exciting stage where we have invested (in classifieds) for several years and this year we are expecting to turn profitable. Then everything turns around and everyone loves the business. So I think it is a little naïve to try to say, ‘oh, you’re a growth business, but you’re not making a profit’ in the internet sector.”
Pay policy
Turning to the remuneration policy, Van Dijk said their “loyal shareholders are generally very supportive of our remuneration policy”.
This comes after Allan Gray, which has a 2.3% stake in Naspers, said Van Dijk’s remuneration wasn’t aligned to the performance of the business outside Tencent.
Van Dijk was paid $2.2m (R28.96m) in the year to March 2017, an increase of 32%, and was awarded $10.4m (R137m) in long-term share options. Allan Gray said they would vote against the remuneration policy.
However, Van Dijk said, “You see, some people like to make some noise. That is really a small slither of our shareholder base.
“Our remuneration policy actually got a tremendous amount of support in our AGM today. Don’t interpret a few loud noise makers as actually reflective of our shareholder base. Look at the vote, is probably what I would say,” he said.
Naspers announced later on Friday that 79% of the shareholders voted in favour of the policy, while almost 18.5% voted against the policy. Roughly 2.5% abstained.
Van Dijk referred to Rachel Jafta, chairperson the human resources and remuneration committee at Naspers, who earlier explained the policy. She said that Van Dijk’s performance was mostly measured by non-Tencent performance within the company.
She said that 50% of short-term incentive was based on financial performance targets, while others include strategic targets that she could not share as these targets included sensitive information.
Van Dijk added: “The fact that my incentives are predominately dependent on Tencent is just technically wrong.
“My short-term incentive is actually – for more than half – not dependent on anything that has to do with Tencent. The long term incentive is a similar story. So it’s just wrong.”
Finding talent
Van Dijk said it is a “brutal” space to find the right talent in the technology space.
“We try to hire the best people in technology,” he said. “We compete for that talent with Google, Amazon and with Netflix, so you want to attract people who can actually help the business work.
“Competition in this space is brutal. You want good people and I think the practice we have of rewarding these people is … considerably more conservative than the likes of a Google or a Netflix.”
* Fin24 is part of Media24, a subsidiary of Naspers.
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