FirstRand Limited (FSR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the 27th AGM of FirstRand Limited. Kindly note that the proceedings of this meeting are being broadcast via live webcast. We have 13 resolutions or matters to be voted on before shareholders at the meeting today, namely 7 ordinary resolutions requiring support of more than 50% of the voting rights exercised, 2 unbinding advisory votes on the company's remuneration policy and remuneration implementation report and 4 special resolutions which require 75% [indiscernible]. We now move to the formal proceedings of the AGM agenda. With me physically in attendance is the Group Company Secretary, Ms. Carnita Low and the following Board committee chairpersons; Chairperson of the Audit Committee, Mr. Grant Gelink; Chairperson of the Risk Capital Management and Compliance Committee, Mr. Russell Loubser; Chairperson of the Remuneration Committee, Mr. Louis von Zeuner; Chairperson of the Social Ethics and Transformation Committee, Ms. Zelda Roscherr. And we have the chairperson of the Directors Affairs and Governance Committee, Dr. Sibusiso Sibisi. Also present are our executive directors, being Mr. Alan Pullinger, our Chief Executive Officer; Mr. Harry Kellan, our Finance Director; and Ms. Mary Vilakazi, our Chief Operating Officer. Our external auditor partners, Mr. Keith Ackerman from PwC and Mr. Kevin Black from Deloitte are available to respond to questions from shareholders that may arise from the audit of the annual financial statements or the integrated reporting suite of documents. Our internal and external legal advisers and various senior executives are also present, either in person or online to respond to questions if needed. We would like to acknowledge our meeting facilitators, being Computershare Investor Services that will be hosting our AGM. We shall now proceed with the business of the meeting. Proper notice convening this meeting has been given to shareholders in terms of the Companies Act and memorandum of incorporation. The notice of AGM was published on our website and mailed to those shareholders who have so elected. I will take the notice as read. It is the intention that voting at this meeting should be by poll in terms of the MOI of the company, such poll voting shall be conducted electronically through the electronic online facility provided. Shareholders entitled to vote at the AGM would have already completed the mandatory registration process with Computershare, company scrutineers and being successfully authenticated. As we are more than 3 members present in person and persons entitled to exercise more than 25% of the voting rights exercisable on the proposed resolutions present, I confirm that we have quorum present. I, therefore, declare this meeting a properly constituted AGM of the shareholders of the company. The scrutineers will facilitate the electronic voting. -- the voting on the electronic online facility has been opened and voting can be performed at any time during the meeting until I close the voting on the resolutions. Accordingly, shareholders will be able to vote on any resolution and do not have to wait for a resolution to be tabled. Shareholders and the appointed proxies attending this meeting are eligible to ask questions verbally from the floor or via the teleconference facility or in writing via the shareholder platform using the Message icon on the screen from the commencement of the meeting until the poll is closed. The operator will facilitate questions from the teleconference facility, and Ms. [indiscernible] will read out the questions on the shareholder platform. And I shall either respond or direct the question to the most appropriate person. Questions will be invited on each resolution as it is tabled. Questions will also be invited again after the final resolution on the agenda has been tabled. Voting will close after the panel has responded to all questions, and shareholders will be advised shortly before the voting is closed. Ms. Low will now advise you on the voting procedure and how to cast your vote on the electronic platform.

Thank you, Mr. Chairman. If you have voted -- if you have registered as a shareholder, you will see a vote icon at the top of the screen. To vote, click the vote icon after the resolution will appear on the screen. Select your voting direction from the options on the screen. Your vote has been cast when the green tick appears. A confirmation message will appear to indicate that your vote has been received. You can change your vote if you need to at any time before the voting closes by clicking on the change or vote link and selecting another voting direction. If you want to cancel your vote, please use the functionality provided and resubmit your vote. Instructions on how to vote are also included in the meeting guide, which is available on the integrated reporting hub, and you can reference these at any time during the meeting. As mentioned, voting can take place at any time during the meeting once the voting has opened. And once the Chairman has indicated that the voting is closed, your last selection will be submitted. Voting is the same for individuals in the room and individuals out online. The procedure to be followed is exactly the same. Thank you, Mr. Chairman.

Thanks, Ms. Low. I will proceed with the matters as contained within the notice of AGM. We'll start with the presentation of the audited financial statements. As required in terms of the Companies Act, the audited annual financial statements of the company for the year ended 30 June 2023 as approved by the Board of Directors of the company, including the reports of the external auditors, the directors' report and the Group Audit Committee report are presented to shareholders. These were distributed and published to shareholders and are available on the company's website. Are there any questions on the presentation of the audited financial statements? Are there any questions from the shareholders in the room? Okay. Questions from the room are now closed. Thank you. Are there questions from the teleconference. Lastly -- sorry? Is there someone on the line? Thank you. Are there any questions from the webcast? Okay. Thank you very much [indiscernible]

We have got a question, but I think we'll deal with it later when it comes to the directors.

Great. Thank you very much. Thank you. The FirstRand Social Ethics and Transformation Committee report is contained in the 2023 FirstRand Governance Report on the integrated reporting hub and reflects matters within the Committee's mandate. The report is presented to shareholders. Are there any questions on the Social Ethics and Transformation Committee reports -- any questions from shareholders in the room? Okay. Thank you. Questions from the room are now closed. Are there any questions from the teleconference? Lastly, are there any questions from the webcast? Thank you very much. We will proceed to the tabling of each resolution. The full wording of the resolutions has been made available to shareholders and will not be repeated. Instead reference will be made only to the item for approval. Please note that more than 50% of the voting rights exercised on each of the ordinary resolutions that follow is required for each resolution to be adopted. Please also be reminded that you can vote on any of the resolutions at any time until the voting is closed. Ordinary resolutions for adoption, reelection of directors. Two directors retire by rotation in terms of the MOI and offer themselves for reelection. It is the intention that the reelection of these directors should be conducted on an individual basis. Ordinary Resolution #1.1 is to reelect Ms. Zelda Roscherr, who is retiring by rotation as an Independent Nonexecutive Director in accordance with the provisions of the MOI. Ms. Roscherr being eligible, offers herself for reelection. Ms. Roscherr's CV has been included in the notice of AGM. The Board has considered the proposals of the Nominations Committee and recommends that Ms. Roscherr be reelected. I put before the meeting that Ms. Roscherr be reelected as an independent nonexecutive director. Ordinary Resolution #1.2 is to reelect Mr. T. Winterboer who is retiring by rotation as an Independent Nonexecutive Director in accordance with the provisions of the MOI. Mr. Winterboer being eligible, offers himself for reelection. Mr. Winterboer's CV has been included in the notice of AGM. The Board has considered the proposals of the Nominations Committee and recommends that Mr. Winterboer be reelected. I put before the meeting. and Mr. Winterboer be reelected as an independent nonexecutive director. Are there any questions on Ordinary Resolutions 1.1 or 1.2? Any questions from shareholders in the room? Thank you. Are there questions from the teleconference? Are there any questions from the webcast?

There are questions from the webcast, Mr. Chairman, but not in relation to these 2 director reelections. So if we can ask shareholders to cast their votes on that, and then we'll take the questions from the webcast.

Okay. Thank you.

If we can take the question from the webcast, please.

Okay. I have a question here from [ Anthony Walker ]. Before we get to the director resolutions, we wish to raise a governance concern, Incorporation MOI since 2015. We have been informed that the Board has considered this provision and decided against amending it. The amendment was previously explained to have been to avoid vexatious litigation and abusive legal process against the prior Chairman, Mr. Dippenaar. The latest justification we have received is that this threat of litigation remains. Our view is it should rather be brought to a head in the appropriate court or legal forum, basic levels of acceptable governance cannot be held hostage by threat of litigation, especially for a close -- for close to a decade. All this is more egregious as it is very difficult to ascribe true independence to incoming Chairman. The incumbent resigning after this AGM already had a questionable independence on tenure. But the new Chairman is extremely hard to view as independent. He's being a former CEO as late as 2018, and it appears he first became a [indiscernible] without any cleansing period between appointments. This means he has a largely uninterrupted period in management or Board at the entity since 1998, 1/4 of a century, extremely far removed from best practice for a [indiscernible] let alone a Chairman, exacerbating the need for a truly independent Chairman is the composition of the Board, which carries several question marks on independents as it is currently composed. Mr. Winterboer is, we understand a former audit partner of FirstRand during the tenure of the incoming Chairman when he was CEO. Mr. Gelink is hard to view as independent on tenure. Mr. von Zeuner and Dr. Sibisi have shared Boards and subcommittees for a number of years and by association, are difficult to view as independent. Ms. Roscherr, we are told a former 8-year appointed consultant to the risk capital and governance committees. Bluntly put, there are questions around independence even before the Board, even before it elects Chairman who is not independent and not answerable by vote to shareholders. It has been explained to us by Investor Relations that the Chair is nominated by the Board and implying this absorbs him of needing to be elected. This raises enormous questions as it would make the Chairman no different to the CEO in process. To illustrate the matter, this would be no different to a President or Prime Minister not requiring his own constituency or ballot for any foreseeable future once he takes office. There is a Lead Independent Director, LID, but the views of FirstRand on the LID's role has been found in our opinions to be wanting, and we are clearly informed, the Board view him merely as a standing when Mr. Burger is viewed as conflicted and/or unable to partake in board discussions. We have had the pleasure of meeting the Lead Independent Director and hold them in high regard. But a lack of any formal banking experience will make his role in countering the views of the new Chairman who was CEO for a number of years. And given the state position we have received about his role, extremely difficult when so required. We seek his role to be expanded appropriately. Shareholders can hardly engage the Chairman on governance matters if he is not independent. Correspondence we have received from FirstRand also indicates the view that directors do not need to stand for election every 3 years on their technical interpretation of King IV and the JSE rules, and goes on at length on this point with a 1 in 3 rotation being even problematic in theory. The correspondence is alarming in itself, but all the more so as it is at complete odds the FirstRand's own MOI, which like all JSE-listed entities, requires directors to rotate 1 in 3, 1/3 of the Board, although again, in FirstRand's case with explicit exemption for the Chairman. Either the Board has not read its own MOI in placing its arguments against rotation or is philosophically at odds with its processes in order to justify having its Chairman not accountable to the ballot. In the correspondence we received from the company, it indicated that both the Prudential Authority and the JSE had approved the exemption, we found it hard to believe that robust and full disclosure of the matters had taken place in all instances, as it certainly did not occur with shareholders outside of Page 538 of a notice in 2015 in an appendix, which is why we are picking up the pieces after the fact. We request this position to be acknowledged in the minutes and placed on the meeting record.

Okay. Thank you very much.

Sorry. And I think there's one more part. Even more astonishing correspondence indicates that whilst they get rotation of directors is acknowledged as a good corporate governance practice that compels Boards to conduct ongoing reviews of the appropriateness of their skills, composition, best practice for any organization means finding and using the best ways of working to achieve its business objectives. This statement is alarming and requires no further comment. It should be noted we are not seeking the removal of the Chairman nearly that he stands for election in accordance with good governance practices, especially given the current constituency of the rest of the Board and question on their independence. And additionally, the Chairman is not in our view, considered in any form sufficiently independent to be on the audit, governance or remuneration committees, all of which require wholly independent members. In terms of process, we raised this matter at the prior AGM and AGM itself -- prior to the AGM previously and at the AGM itself, at last year's AGM and undertaken of review was made by the Chair on behalf of the Board. We received no further information on the matter. And so we call for a meeting with a lead independent director, which we were only afforded the opportunity to meet in the past week. At this meeting, we were informed that the review took place in February of 2023 without any feedback being provided to shareholders had we known we would likely have proposed a shareholder resolution for the AGM on this matter.

Sorry. Ms. [indiscernible], could you repeat the last sentence?

sorry. Since I was at the meeting of the Lead Independent Director last week, they were informed that the review took place in February of 2023 without any feedback being provided to shareholders. Had we known, we would likely have proposed a shareholder resolution for the AGM on this matter.

All right. Thank you very much. I think Mr. Walker, thank you for that. You would be well aware that we have engaged with shareholders, will consider the matter of governance -- matters of governance diligently and seriously as yourselves. I'd like to point out that I did offer to meet with you, which you declined and met with the Leading Independent Director. The issue of Chairman rotation in the MOI has been raised previously, and it was reviewed as you point out. We reiterate that no legislative regulatory framework has been breached. The Board reconsidered this principle as per the discussion at the AGM last year and as the custodians and stewards of FirstRand elected not to amend the MOI in this respect. This issue was raised with the Lead Independent Director when the meeting happened, as you mentioned. And the Lead Independent Director undertook to revert to the Board on all the issues that you raised. And I'm confident that the Board will opine on the matter again. I think most of the issues you raised were not questions. They were statements, which I'm sure the Board will consider. Thank you very much. Mr. Dippenaar?

I'd also like to make a few statements. I'm speaking as one of the founding shareholders. I specifically like to address this issue of independence. Now -- and a reference to Mr. Burger, he would not have been accepted or pointed by the Reserve Bank as Chairman of the bank, if he hadn't -- they hadn't been satisfied on that score. So let us just say in terms of King and the Reserve Bank is ticked all the boxes. Now I'd like to bring some common sense to this topic. And I'm reminded, I got to tell you a story. I attended the AGM of Warren Buffett on 6 occasions, Berkshire Hathaway. Someone raised the question of independence, I think Mr. Buffett's independence. Now it was actually specifically Bill Gates because he held a lot of shares in Berkshire Hathaway. And Mr. Buffett responded as follows: he said, "Do you want someone like Bill Gates on the Board with a big investment in there or some director that technically takes every independent box. But he needs the $200,000 Board fee and it will not even rock the boat for at risk of losing that Board appointment. It's extremely difficult to find good directors for a banking board because it's so technical, so complex and obviously, some banking experience is required. Now back to Mr. Burger, I was thrilled as a big shareholder and a very significant part of my net worth invested in this bank when he was appointed. Regarding as one of the best bankers this country has ever had and I can't think of a fine pair of hands to entrust the chairmanship of the bank. So to summarize, he is stick to technical requirements. And then the common sense requirements he fulfill in bucket loads. Thank you.

Thank you very much. Mr. Dippenaar. Are there any other questions? Thank you very much. I think...

Roger, just 1 more note from Anthony Walker. To say please note, we have asked to raise our concerns before the director resolutions, we have concerns around Board and independents.

Well, thank you very much. I think there are divergent views on this issue. Ultimately, the Board of FirstRand considers all of the views and takes a decision on how best the stewardship of FirstRand should be managed. This matter was discussed early in the year after the AGM. A range of opinions have been raised on the same matter again, and the Board will opine on it further. So thank you very much. I would like to proceed with the next item. Ordinary Resolution #1.3, is to elect Ms. T C Isaacs as an independent non-Executive Director to fill a board vacancy in accordance with the provisions of the MOI. Ms. Isaacs' has been included in the notice of AGM. Ms. Isaacs' was appointed by the Board upon the recommendation of the Nominations Committee, and the Board recommends that Ms. Isaacs be elected by shareholders. I put before the meeting that Ms. Isaacs be elected as an independent nonexecutive director. Are there any questions on Ordinary Resolution 1.3? Are there any questions from shareholders in the room? Thank you. Are there questions from the teleconference? And lastly, are there questions from the webcast? Thank you very much. Ordinary Resolution #2.1 and #2.2 relate to the appointment of Ernst & Young, Inc. and the reappointment of PricewaterhouseCoopers Inc. as joint auditors for the ensuing year. The Audit Committee has considered the assessments for Ernst & Young and recommends its appointment as Joint Auditor for the financial year ending 30 June 2024. The Audit Committee further evaluated the independence, performance and skills of PricewaterhouseCoopers Inc. and recommended its reappointment as Joint Auditor of the company. These recommendations were further endorsed by the Board. It is accordingly proposed that the appointment and reappointment be made on a joint basis. However, if either Resolution 2.1 or Resolution 2.2 is not passed, the resolution passed shall be effective. 2.1, the motion, Ordinary Resolution 2.1 that Ernst & Young Inc. appointed as auditors is put to the meeting. 2.2, the motion, Ordinary Resolution 2.2, that PricewaterhouseCoopers Inc. be reappointed auditors of the company is put to the meeting. Are there any questions on Ordinary Resolutions 2.1 or 2.2? Are there any questions from shareholders in the room? Thank you. Are there questions from the teleconference? And lastly, are there questions from the webcast? Thank you. I now move to Ordinary Resolution #3, the General Authority to issue authorized but unissued ordinary shares for cash. The percentage of voting rights required for this Ordinary Resolution #3 to be adopted is at least 75% of the voting rights exercised on the resolution. The directors are authorized to issue all or any of the authorized but unissued ordinary shares in the capital of the company for cash, provided that the aggregate number of shares to be allotted and issued shall be limited to 1.5%, which constitutes 84,98,815 of the number of the company's shares in issue. The motion for the General Authority is put to the meeting. Are there any questions on Ordinary Resolution 3. Are there any questions from shareholders in the room? Are there any questions from the teleconference? And lastly, are there any questions from the webcast? Thank you very much, Ms. [indiscernible]. Thank you. Ordinary resolution #4 pertains to Signing Authority. It is proposed that any director and/or the Group Company Secretary of the company, be and is hereby authorized to do all such things and sign all such documents as may be necessary for or incidental to the implementation of the resolutions passed at the AGM of the company and set out in the notice. The motion for the Signing Authority is put to the meeting. Are there any questions on Ordinary Resolution #4? Are there questions from shareholders in the room? Are there questions from the teleconference? And lastly, other questions from the webcast. Thank you very much. We now turn to advisory endorsements. Advisory endorsement of remuneration policy and implementation report, Advisory Endorsement 6.1 proposes the endorsement by way of a nonbinding advisory vote of the company's remuneration policy, excluding the remuneration of the nonexecutive directors and the members of the Board committees for their services as directors and members of committees. In terms of King IV, we request shareholders' endorsement of the remuneration policy in the form of an advisory vote. I propose that the company's remuneration policy be endorsed. Advisory Endorsement 6.2 proposes the endorsement by way of a nonbinding advisory vote of the company's remuneration implementation report. In terms of King IV, we request shareholders' endorsement of the remuneration implementation report in the form of an advisory vote. I propose that the company's remuneration implementation report be endorsed. Are there any questions on Advisory Endorsements 6.1 and 6.2? Are there any questions from shareholders in the room? Are there any questions from the teleconference? And lastly, are there questions from the webcast?

Yes, we have a question from Temlandvo Mathebula, an investment analyst from Aeon Investment Management. The first question. Why does FirstRand not disclose the pay ratios and the gender pay gaps by major geographic segments? The second question, I'll wait for a little bit later.

Thank you very much. I will hand over to the Chair of the Remuneration Committee.

Chairman, in terms of pay ratios and gender pay gaps, we do not currently disclose any of that information. We only disclose our process for addressing income differentials. I reference Page 11 of the remuneration report in that regard. However, I think in terms of the process, we will always comply with whatever requirements get set, and therefore, we watch the debate taking place and follow it in terms of enhancements to the Companies Act. But for now, we do pay attention to the topic and deal with that matter internally. Internally, checking income differentials and those submissions get made to the [indiscernible] and the [indiscernible] on an annual basis, and those issues get addressed. But Chairman, I think one would like to just reiterate that we apply a process of equal pay for work of equal value. And that we feel strongly about, and we monitor that through internal audit processes as well. The matter is a complex matter. And I think what is important is that we check ourselves annually on that fairness principle. And I think the topic is a lot more complex when one deal with issues of nonclerical staff, et cetera, where we don't outsource certain functions, we provide job security. There's many other benefits to staff. And I think when there is a common industry standard we would obviously participate on disclosure into the future.

Thank you very much, Mr. Zeuner.

The next question relates to the special resolution on directors' fees. So I think you can carry on.

Special resolutions that follow require at least 75% of the voting rights exercised on each special resolution to be adopted. Special Resolution #1, is for the General Authority to repurchase ordinary shares. The resolution is proposed to enable the company and/or its subsidiaries in terms of a General Authority to acquire the company's issued shares from time to time. The motion is put to the meeting. Are there any questions on Special Resolution #1.

Yes. It's Professor [ Yang Kruger ]. I am very -- I just want to comment strongly against any repurchase of shares. People -- companies repurchase shares when they have excess cash. If you don't have anything better to do with that cash, then you can pay it out as a dividend. But I consider it as a motion of no confidence in the industry, if you can't find better investments than buying back your own shares. And in that case, it's better to give it back to the shareholders because it's, in fact, a misuse of shareholder funds. Thank you.

Thank you very much for that comment. Thank you. Are there any further questions or comments from shareholders in the room? Thank you. Questions from the teleconference? thank You very much. Questions from the webcast? Thank you. Special Resolution #2.1 pertains to financial assistance to directors and prescribed officers as employee share scheme beneficiaries. The directors may, when applicable, authorized the company to provide direct or indirect financial assistance to [indiscernible] any director or prescribed officer of the company,or of a related or interrelated company in order to facilitate the participation by such director or prescribed officer in any employee share incentive scheme. The motion is put to the meeting. Special Resolution #2.2 pertains to financial assistance to related and interrelated entities. The directors may, when applicable, authorized the company to provide direct or indirect financial assistance to any related or interrelated company or corporation. The motion is put to the meeting. Are there any questions on Special Resolution 2.1 or 2.2? Are there any questions from shareholders in the room? Are there any questions from the teleconference? Thank you. Are there any questions from the webcast? Thank you, Ms. [indiscernible]. Remuneration of nonexecutive directors. Special Resolution #3 relates to the remuneration of nonexecutive directors for the period 1 December 2023, and to 30 November 2024. The proposed increase represents a 5.5% increase for each committee following a 6% increase in the prior year. The motion is put to the meeting. Are there any questions on Special Resolution #3? Are there questions from shareholders in the room? Are there questions from the teleconference? And are there questions from the webcast?

[indiscernible] second question. The Board Chairman's fees are 15x more than the lowest paid committee chairperson, Social Ethics and Transformation Committee Chairperson. What is the Remuneration Committee's view on this ratio?

Thank you very much. Mr. von Zeuner, Chair of the RemCo.

Chairman, I think -- thanks for the question. I think annually, we do a benchmarking exercise, and we use advisers to determine levels of remuneration of our Chairman as well as nonexecutive directors. We are comfortable with the level of reward and the remuneration to Board members. I don't think that it's always an accurate measure to compare with chairs of committee versus workload and responsibilities of the chair. So it's an annual assessment that we do, and we feel comfortable with the position.

Thank you very much. Are there any other further questions? Thank you very much. All ordinary resolutions, the advisory endorsements and all special resolutions have been duly tabled. No notice has been received of any other business, and this, therefore, concludes the matters upon which shareholders are required to vote. Additional questions pursuant to the resolutions tabled that have not already been covered by the panel may be raised prior to the voting closure. Please be reminded to cast your votes as the voting will close immediately after the question-and-answer session. Are there any additional questions from shareholders in the room? I see a hand over there. Thank you.

Thank you very much, Chair. My name is [indiscernible], I am from [indiscernible]. I will quickly follow up on the wage gaps questions that have been raised by Aeon Investment Management, similar but different. Chair, in your report, you state that FirstRand will comply with the new Companies Act requirements [indiscernible]. As you may know, Chair, the current rough Companies Amendment Bill does not address the issue of gender pay gap disclosures, which is an area that FirstRand reports that has been working on in its remuneration philosophy. Given that pay parity is one of the focus area in the upcoming year, is the company able to disclose some of the gender pay gap differentials voluntarily so, Chair, that has been working on, or will you do so in the next reporting set? Just to emphasize, Chair, not based on regulation, but the voluntary disclosure provided that this has been a focused area of the company as you report. That's -- I don't know. I have 3 questions on my colleague here, should I ask all...

Are they related or...

No, no, no. They are not.