Rob Shuter’s MTN sign-on bonus shrivelled by weak share price

MTN Group CEO Rob Shuter was paid out a sign-on bonus of just R17.8-million in March. This is a sizeable figure but it’s less than half of the value indicated in March 2017, at the time he was awarded the bonus.

When Shuter, who has announced he will be leaving MTN when his four-year contract expires next March, was headhunted from Vodafone Europe and was granted 327 214 MTN shares as contractual compensation for equity he forfeited from his previous employer.

A spokesman for MTN said the shares had a three-year vesting period and were paid out at the prevailing share price in March of R54.39. This was less than half of the R125 at which MTN was trading in March 2017, when Shuter’s sign-on bonus was valued at R41-million.

Chief financial officer Ralph Mupita who was also given a sign-on bonus in 2017, did significantly better than Shuter. He was awarded 446 027 MTN shares, a month after Shuter. These were paid out in October 2019 when the MTN share price was R94.28, giving him a bonus of R42-million.

Group chief operating officer Jens Schulte-Bockum was awarded a sign-on bonus in January 2017 of 64 432 shares, which were settled in January 2020 at a share price of R89.12 giving him a bonus of R5.7-million.

While Covid-19 concerns knocked the share price in March, along with most of the market, MTN has been on a steadily weaker trajectory for a lot of the time Shuter was at the helm.

Analysts say the high growth enjoyed by the sector globally is a thing of the past and that share price performance is coming into line with that reality.

Aggravated

MTN’s share price woes were also aggravated by various regulatory problems it faced, in particular the ongoing and expensive regulatory challenges in its largest market Nigeria, which were triggered long before Shuter’s arrival. Last month, Mupita confirmed MTN intended to press ahead with plans to reduce its majority holding in the Nigerian business due to the high-profile clashes with the government.

Also knocking investor sentiment is legal action in a US court asserting claims for civil monetary relief under the US Anti-Terrorism Act. The litigants allege MTN made protection payments to the Taliban to ensure its infrastructure would not be attacked and also that it deactivated its cellular network at night at the Taliban’s insistence. Last month, MTN requested the US court to end the lawsuit and grant a judgment in MTN’s favour. It argued the court lacked jurisdiction over MTN, which does not operate in the US, and also that the complaint does not allege any conduct by MTN that would have violated the Anti-Terrorism Act.

Meanwhile, back in South Africa, MTN finally came to an agreement last month with the competition authorities about cutting the cost of data.

It may be of some compensation to Shuter that the Vodafone share price did not do too much better — over the three-year period since he left it has almost halved in value.

Announcing his departure at the end of the 2019 financial results presentation in early March, Shuter said that leading MTN had become “an enormous sacrifice”.

“I’ve loved my time here. It’s been the greatest privilege of my working career, but it’s been enormously challenging.”

While his departure is the highest profile one at MTN, it is far from being the only one. During financial 2019, MTN announced six other board retirements with one shareholder activist noting that, effective May 2020, half the MTN directors have served for less than three years. Long-serving directors Alan Harper, Jeff van Rooyen and Koosum Kalyan left the board at the end of 2019. They were followed by Peter Mageza and Dawn Marole at the end of last month. Christine Ramon, with just five years, will be the longest-serving independent director on the board. In addition, the group’s chief legal counsel — surely a busy position at MTN — left in July 2019.

More significantly, last December Phuthuma Nhleko ended a decades-long executive involvement with the company he had played a crucial role in building (he will be joining the high-profile advisory board appointed late last year).

Problematic

Mike Martin of Active Share, which advises NGOs how to vote at AGMs, says the extent of the changes – all within an 18-month period – is problematic. “We have concerns about continuity and the potential loss of institutional knowledge,” said Martin. His concerns are compounded by the limited information provided on the new directors and fears some may be overextended.

Among the existing directors, Martin said that Paul Hanratty’s appointment to head up Sanlam, from 1 July this year, will surely make it almost impossible for him to play an effective role on MTN’s audit committee. Hanratty, who was appointed to the MTN board in 2016 is currently one of the longest-serving directors.

Not all analysts share Martin’s concerns, believing the board churn poses little or no risk because the group’s high-growth, high-risk strategy is a thing of the past. However, Sasfin’s Alec Abraham says that being spread across so many jurisdictions, whether or not there is high-growth, creates considerable complexity for the running of the business. “There are no economies of scale on regulation,” said Abraham who agrees all the boardroom changes represent a disadvantage to the group.

The MTN spokesman said the company is confident there is sufficient institutional knowledge, which will be blended with the new and fresh views of the incoming directors. MTN says it had been necessary to “evolve” the board as many of its directors had been serving for over nine years.

“The changes were also implemented in order to realign the skills mix following a comprehensive review of the skills retained on the board. As such, it was resolved to stagger the departures over a few months while also appointing new directors to the board. It was thus a deliberate process to evolve the board in an orderly and seamless manner.”

• This article was originally published on Moneyweb and is used here with permission