MultiChoice paid former chair Imtiaz Patel a bonus of about R22m for overseeing a partnership between its streaming service Showmax and US content group Comcast, a move that has raised some eyebrows.
In its annual report released on Friday, Africa’s largest pay-TV operator said Patel was awarded the bonus because he “played a leading role in the successful completion” of the deal in financial 2024.
“He started developing the deal over the Covid period, while executive chairman, when discussions commenced for a strategic partner,” the report says.
“On the recommendation of the remuneration committee at the time, a bonus of $1.25m [about R22.75m at Friday’s close], was approved, and payable on the completion of two key deliverables within the prescribed period. These deliverables included: 50% payable on the signing of all required agreements by April 2023, and the remainder was payable following the delivery of the commercial launch by early 2024.”
The bonus was slightly more than Patel’s annual salary. The Showmax/Comcast bonus was in addition to his annual remuneration of just over $1.1m.
The deal with Comcast has been criticised by MultiChoice’s biggest shareholder, Canal+. The report said the chair of the remuneration committee, Jim Volkwyn — who presided over the meeting at which Patel’s R22m bonus was rubber-stamped — saw his board fees rise 25% to R6.4m. The decision to award him an increase five times that of new chairman Elias Masilela, was made at a meeting that, coincidentally, was chaired by Patel.
All of the arrangements concerned were considered and approved by the remuneration committee and then by the full board
— MultiChoice
Other members of the board received fee increases ranging from 7% to 13%.
At the time of going to print, Volkwyn had not responded to Business Times questions, while Patel said MultiChoice is best placed to answer the questions.
Publication of the payment details came shortly after controversy over board consultancy fees previously paid to Patel, Volkwyn and Kgomotso Moroka — whose service agreement has since been terminated — in return for professional advisory services. The board defended the fees as costing less than outsourcing the service would.
In February, MultiChoice launched a revamped Showmax in 44 countries in Africa, following the joint venture with Comcast, which now owns 30% of the platform.
It said in the annual report that Volkwyn’s consultancy agreement was for professional advisory services provided to the group CEO on a regular and extensive basis.
The scope of Volkwyn’s consultancy services is “global in nature and involves advising on key group strategies and projects. This agreement is complementary to his role as director and involves an annual fee for the significant amount of additional time and effort to provide global strategic input to the group.
“Volkwyn’s in-depth understanding, stemming from nearly 40 years with the group, also provides us with a significant strategic advantage as we evaluate many opportunities to grow our business over the longer term. The contract is considered immaterial to Jim’s overall wealth,” the company added.
He has since stepped down as a lead independent director but remains a non-executive director.
In response to questions from Business Times, MultiChoice said it “enters into consultancy service agreements where the company requires skills, specialist knowledge and a commitment of time over and above normal board services”.
“Executives are incentivised via cash or shares with specific targets set by the board. All of the arrangements concerned were considered and approved by the remuneration committee and then by the full board. Last year, over 95% of shareholders voted to approve [MultiChoice Group’s] remuneration policy and implementation — the highest rate of approval since the listing of the company.”
It is not clear whether other executives worked on the Comcast/Showmax joint venture and if they were also compensated.
An independent analyst who did not want to be named said the MultiChoice board remuneration philosophy “definitely raises eyebrows”, particularly in light of what appeared to be disparities in the remuneration of board members and the consultancy arrangements given to certain board members.
“Shareholders would need to pay very close attention to these board consultancy arrangements as they have the potential to erode proper oversight and effectively plunge the company into a corporate governance crisis. The amounts paid to some board members and the former chair seem exorbitant.”
Patel stepped down on April 23 after rescinding an earlier decision to leave, saying he would stay on to oversee a takeover bid by Canal+. Two weeks later, the board announced Patel was in fact leaving and would be replaced by Masilela.
Executives are incentivised via cash or shares with specific targets set by the board. All of the arrangements concerned were considered and approved by the remuneration committee and then by the full board
— MultiChoice
The French media giant has made a mandatory offer of a takeover of MultiChoice for R125 a share, 67% higher than MultiChoice was trading at in February when it made the initial bid for control.
Maxime Saada, chair and CEO of Canal+, which now owns 45% of MultiChoice, has repeatedly voiced his concerns about the Comcast deal. In a media briefing early this month, Saada said Canal+ was yet to do due diligence on MultiChoice to understand the terms of the deal.
However, he said: “Where I have a problem is I believe OTT is the future of our business. Everyone knows that. I have a problem with MultiChoice selling off 30% of what I call the future of the company to a third party, American or French, whoever. I think it’s a problem that you don’t own and control fully your tech stack. So I’m a little worried about that. You are dependent upon another company for something.”
He said Canal+ was informed about the deal two hours before it was announced to the public. “I didn’t like it, but that’s how we learnt about it.”
In an earlier interview with Business Times, Masilela said the consultancy fees would be reviewed and likely be scrapped.
“Everything has a sunset clause. These were legacy contracts that were necessary for the company because we know that when you employ board members, you employ people who are experts in their own fields as it may be quicker to get an answer from them on a technical aspect rather than getting that from the outside, [which] can take longer,” Masilela said.
MultiChoice’s annual report said the fee structure for non-executive directors was “designed to ensure we attract, retain and appropriately compensate a diverse and experienced board”.
“Nonexecutive directors receive an annual fee as opposed to a fee per meeting, which recognises their ongoing responsibility to ensure effective governance of the group. Remuneration is reviewed annually and is not linked to the group’s share price or performance,” it said.
Moreover, nonexecutive directors are also paid for their cross-membership of the group’s major subsidiary boards including MultiChoice South Africa and Showmax Africa Holdings. Nonexecutive directors with such cross-memberships receive a single fee at a MultiChoice group level.
In its results for the year to end-March, MultiChoice revealed that it had lost 9% of its subscriber base year on year and was now down to 15.7-million subscribers. In South Africa, 400,000 customers stopped paying for the service mainly due to intense load-shedding and high subscription prices, while in the rest of the continent the figure dropped 13% to 8.1-million.
Showmax delivered record single-month growth in March 2024, with the paying subscriber base growing 16%. Investments in Showmax continue to hit MultiChoice’s overall earnings. The streaming service increased trading losses to R2.6bn, due to higher staff costs and sales and marketing expenses incurred for its relaunch. MultiChoice said Showmax was on track to achieve $1bn in revenues in five years.
Last week the company sold a 60% stake in its insurance business for R1.2bn in cash up front and a potential performance-based earn-out of up to R1.5bn to Sanlam. The business sells funeral and life policies as well as device covers.
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