CEO Prakash Desai was paid out share options of nearly R25m for the year to March last year as the media business he managed was split into two, and a valuable holding in pay-TV channel MNet was sold.
Payment of the share options was accelerated, allowing Desai to exit Element One, the holding company, just before share prices slumped in the recession.
Desai also received an additional R3m bonus in that period while financial director Howard Benatar received a R1m bonus, bringing the total paid to them in bonuses, performance-related payments and salaries to R40m.
The share option payments appeared to have slipped Desai’s mind when he was questioned by shareholder activist Theo Botha on Monday at the Avusa annual general meeting on lack of information on 2008 bonuses and remuneration for executive directors in the latest Avusa annual results for the year to this March.
Avusa, which owns 50% of Business Day, did not produce annual results for the year to March last year as the executives were then employed by , a holding company that issued results separately. Avusa as it now exists, listed on the JSE at the end of March last year.
According to ElementOne’s financial results for the year to March last year, Desai received R24 028 502 while Benatar received R5 386 026 for incentives relinquished in exchange for what ElementOne refers to in its annual results as “cash bonuses”.
In August 2007, Desai relinquished 167 272 incentives in exchange for a cash bonus of R13 378 070. Then in January last year, he received a top-up payment of R4,6m upon the disposal by ElementOne of its interests in MNet/SuperSport and the unbundling of N share proceeds.
The Avusa board, in terms of the share scheme rules, modified the allocation price and made top-up payments.
In March last year, following the disposal of ElementOne’s operating media and entertainment assets into Avusa, and the subsequent termination of employee share incentive schemes, Desai relinquished 154 269 incentives in exchange for a R6m cash bonus.
His 163 948 unexercised incentives were rolled over to Avusa on March 31 last year.
Benatar relinquished incentives to the value of R2,9m, received a top-up payment of R913 533, and in March last year relinquished shares to the value of R1,5m.
An industry insider, who asked not to be named, said Desai and Benatar cashed in on an “unbundling bonanza, not because they added any value but because the company broke up while they were in charge”.
“Desai was lucky. He was in the right place at the right time, and he got paid out at an accelerated rate before the share price fell, which meant he made a good profit,” he said.
Tom Wixley, who was a member of the remuneration committee at the time, agreed that amounts received in respect of share incentives were “significant”, but said “all participants in the share incentive scheme also benefited, but individual amounts were not disclosed because they were not directors”.
Wixley said the value of Desai’s options had been building up since 2001 when he joined the company.
“He is one of those people who did not cash in his options over the years,” Wixley said.
“When he joined, the price of Johncom shares was very low. In fact, we were making losses as a company, and as the company began making profits, which he contributed to, he benefited.”
Wixley said a scheme of this sort was intended to align the interests of executives with those of shareholders.
Desai denied in a statement yesterday that it was a bonus.
“I was forced, obliged to exercise all options allocated over the past 10 years of employment at the group when the legal entity ElementOne was formed and I parted company to a new legal entity,” he said.
benjaminc@bdfm.co.za