Shareholders clap back at boards

So, judging by the results of its recent AGM, it seems the low-level civil war between Quantum shareholders grinds on. Not only did the board prevent them from asking questions – the electronic-only meeting was an abrupt 26-minute affair – but ordinary resolutions were secured on the thinnest of margins and both of the special resolutions had to be scrapped.

One of the scrapped special resolutions was to approve the payment of non-executive directors’ fees. It needed 75% support but only received 51.27%. This makes it the second year in a row that shareholders have voted against paying Quantum’s non-executive directors.

You have to wonder why the independent non-execs bother. It can’t be an easy gig. With a market cap of R1.3bn Quantum is a low-profile business – but it’s sitting with a high-profile governance mess, which can’t be too comfortable for the directors. Particularly last year, given the fallout from their controversial firing of one of their board colleagues. 

Quantum’s directors are part of a growing club of directors who’ve suffered the ignominy of irate shareholders expressing their displeasure with boards by blocking payment to directors. The first-known member of this club was Astral chair Theuns Eloff, whose R1.1m fee was blocked in 2018.

Next up was Mpact where Caxton, with a 34% holding, has managed to block payment of directors’ fees for the past few years. The Mpact board has cleverly side-stepped the move by appointing all the main board directors to a fee-paying subsidiary.

Spar’s shareholders rather bizarrely voted against directors’ fees in protest against the appalling events leading up to the 2022 governance implosion, apparently not realising they were set to punish a new and more vigorous batch of directors. Most of the underperforming directors had already banked their fees and headed out the door. A special shareholders’ meeting reversed the ill-considered decision.

Earlier this year, RMH’s shareholders, irked by the remarkably generous remuneration packages paid to executives, voted against directors’ fees. Luckily for the directors, RMH’s memorandum of incorporation allowed the previous year’s authority to roll over.

Hostile relations

Meanwhile back at Quantum Foods’ recent AGM, the only matter on which there was any sort of agreement was the reappointment of external auditor Ernst & Young, which got the backing of 82.36% of shareholders.

The voting pattern tells a story. That story is about the battle for control of Quantum Foods between the barely controlling shareholder block led by a private equity outfit called Silverstreet, which has about 34.78% and appears to be onside with management. Also in that block, informally, is Capitalworks in combination with Crown Chicken, which in early March built up their stake to 15.05%.

The opposing camp comprises Country Bird Holdings (CBH) with 18% and Braemar Trading, a company associated with Zimbabwean tobacco family the Rudlands, with 31%. Analysts reckon it’s unlikely that these two parties are working together though they may have similar objectives.

One of those objectives was to get a director appointed to the board at this year’s AGM. Both failed. CBH’s nominee, Catherine Kimaryo, and Braemar’s Brian Rudland were opposed by 51.25% of the shareholders.

After that it was probably inevitable that CBH and Braemar would ensure neither of the special resolutions were passed.

How things have changed since the traditionally docile AGM of 2023. The shareholder turnout at that meeting was just 53.4%, compared with 97.58% at the latest, and most of the resolutions received 100% of the vote, with the exception of the re-election of director Tanya Golden who received “only” 97.5%.

You may remember Golden was the director who was unceremoniously fired by her board colleagues last May.

That was just a few months after a considerably more eventful 2024 AGM. At that meeting it had become obvious that relations between the controlling shareholders and new investors who had moved in on the company since 2020 had become far more hostile.

Since 2020 CBH had been pushing the board for a meeting to discuss various issues including the removal of certain directors, but to no avail. And from early 2024 Braemar had been making similar and equally futile attempts to meet with the board.

It seemed the 2024 AGM was the only outlet for their frustration. A block of between 36% and 40.52% of shareholders voted against all the ordinary resolutions and prevented the special resolutions, including authorisation of directors’ fees, from being passed.

Eventually in September 2024 the much-called-for shareholder meeting was held. But it was a grim electronic-only affair, and the voting results reflected the shareholder split evident in the February AGM. There were no changes to the board.

Well, none other than the controversial firing of Golden earlier in the year, apparently for encouraging a less hostile approach to the demands of the frustrated major shareholders.

Stalingrad tactics

The May Sens statement announcing Golden’s departure was the usual bland affair, merely stating she had resigned as a director with immediate effect and wishing her well.

Just how misleading this statement was became apparent in November, when the Western Cape High Court ruled that Golden’s removal was “invalid, unlawful and void” and that she must be reinstated with immediate effect. It turns out she had not resigned but had been unceremoniously fired.

The court also ruled that the board issue another Sens statement notifying shareholders of the court’s order and the grounds on which the order was granted.

Five months later there’s still no sign of any Sens statement dealing with the Golden matter.

In November the JSE’s director of issuer regulation, Andre Visser, told Currency: “We are engaging with the company and their sponsor.” Because of this he could not comment at that stage.

Asked for an update earlier this week, Visser told Currency he could not disclose details of the JSE’s engagement with the company, “but I can confirm that we have engaged with them and their sponsor and at this stage there is no further Sens required in terms of the listings requirements”.

Visser suggested that Currency contact Quantum Foods, “as they may be able to shed some more light on the current situation”.

Quantum Foods did not immediately respond to requests for comment. But during a results presentation in early December CFO André Muller told investors they were advised “there’s no JSE requirement for the company to publish an announcement on Sens” because they had lodged an appeal against the court ruling.

Meanwhile Golden has been left out in the cold and awaits details of the Supreme Court of Appeal hearing, which she reckons is unlikely to be held before the first quarter of next year.

Looking on in some bemusement is small-cap analyst Anthony Clark, who continues to wonder why there’s so much fuss around a share that is so tightly held it has almost become irrelevant from a market perspective. He acknowledges financial 2024’s profit improvement but is unimpressed by the company’s prospects and fears that too much of its limited resources are being spent on lawyers.

“It’s all a question of who’s going to blink first,” Clark tells Currency, adding: “Quantum Foods won’t blink.”

This means the Stalingrad tactics will continue until CBH and Braemar walk away. Which may or may not mean more scope for more hasty and fractious AGMs.