/ 13 May 2011

Theo Botha — the shareholder activist

Theo Botha The Shareholder Activist

It is midday at the Melrose Arch Hotel and Theo Botha looks every inch the businessman: black pinstripe suit, white shirt and a striking red tie, his Blackberry always within reach. It would be hard to guess that he is a pesky thorn in the side of many large corporations: a shareholder activist and relentless advocate of good corporate governance.

Botha’s interest in companies is usually piqued by news articles; he then looks for annual reports and may request minutes or other documentation. Often there are hurdles, particularly if he is not a shareholder, but Botha is never fazed.

“I just buy a share.” He now boasts a large portfolio of single shares from “up to 20 companies”.

He claims there is no particular method to select which companies he targets. “I went through a stage when I went through all the banks,” he says, as if it was merely a bout of the flu. Considered a controversial figure by many, Botha is a familiar face at annual general meetings where he asks probing questions and ensures that the real issues are placed on record.

He obtained a BCom honours degree at Unisa while doing his articles at PricewaterhouseCoopers. But in 1987 his father passed away and he returned to the family farm in Bronkhorstspruit. For seven years he farmed cattle, dairy and maize, but left in 1994 and became a property broker in Johannesburg. In 2002 he made a small investment in a life assurance company — the Sage Group — and soon had his first taste of shareholder activism. “This is where it all really started,” he says.

Botha found that Sage’s losses were not in the annual report, even though they had been disclosed to American shareholders. He confronted the group, but had little joy and soon took it to the media. The share prices began to tank further and investors started selling. After Sage, he says, “I suppose I became addicted to it”.

Botha has graced the headlines several times this year and just last month he was denied entry to the Anglo American annual general meeting in London. Anglo, Botha says, has to take responsibility for the incident — “but I must accept the apologies”.

His interest in the company began when he read about social issues at Anglo Platinum in the media. “The only reason I attended the Anglo American AGM last year was because I was stuck in London because of the volcanic activity. I had to find something to do,” he says, joking.

But now that Anglo American chief executive Cynthia Carroll has been appointed the chairperson of subsidiary Anglo Platinum, Botha is determined to pursue the issue. “I would like to see her step down. It defies all logic what she has done there. I’m digging my heels into this one.”

The Mail & Guardian previously reported that Botha had raised concerns about Carroll’s involvement in Angloplats’s decision about dividends — which has a direct impact on Anglo American’s performance and, subsequently, on the remuneration of Anglo American executives, including Carroll herself.

When looking at issues of corporate governance, Botha also notes whether companies adhere to King III — the third non-legislative King code of governance principles. It is based on the “apply or explain” system and was introduced by the Institute of Directors in Southern Africa. This approach remains a hotly debated topic globally.

This code is clearly a burning issue for Botha, who struggles to hide his frustration when broaching this subject: “King III is not the alpha and the omega.” King II, he says, has no meaning whatsoever, adding that where King III is “apply or explain”, it should really be “comply or explain”. “It’s not working,” he says. “We should rather have 30 principles that are simple and easy to apply instead of the 76 principles currently in place.

“Companies are too afraid to say that they don’t adhere and we are coming down to a ‘tick-box’ scenario.” Botha understands why other shareholders aren’t taking companies to task as readily as he does. “It is time-consuming and there is nothing in it for me in terms of money.”

He is able to afford to indulge in this hobby, although he doesn’t have an extravagant lifestyle. “I make enough money to put food on the table,” he says. Botha owns a small company that compiles annual reports. “We don’t have many clients,” he says, chuckling. He also acts as a consultant to some listed companies and emphatically rejects the suggestion that it is unethical: “I am commenting on public documents; there is no conflict of interest.”

Although it has been a constant uphill struggle, there have been some rewards for his years of activism. “I am starting to see better governance in companies and company secretaries seem to be more and more aware of stakeholder interests.”

Although he hopes to add to the debate of good corporate governance, it is not the ultimate message. “There needs to be a balance between the adherence to King II or III and the drive for profit. “I’m sure boards see me as an irritation,” he says.

“From my perspective, I respect these directors for what they are. I don’t care if they respect me or not. That’s not what I’m there for. I am there to ask questions to stimulate public debate.” Anglo spokesperson Pranill Ramchander told the M&G that “Anglo American has apologised unreservedly for what was a very unfortunate situation that arose from a misrecording of Mr Botha’s details by our transfer secretaries — and for which we, Anglo American, take ultimate responsibility.

“[We] have offered to answer all the questions posed by Mr Botha directly to him — many of which were asked at the Anglo Platinum AGM and were answered in full, and we have offered to reimburse his travel expenses for a wasted trip to the UK. Mr Botha has declined this offer but has asked if we would instead be willing to make a donation to a university project, a request that we are happy to oblige.”