Nicola Mawson

The mastermind behind the accounting fraud at Steinhoff, Markus Jooste, continued to earn millions in both euros and rand even as the company came under increased scrutiny over its financial situation.

Jooste, who reportedly killed himself in March last year a day before he was set to be arrested on several charges of fraud, continued to earn a remuneration package that – apart from the 2017 financial year – grew at an annual rate of above inflation.

Included in his income each year was a base salary worth millions of rand, the same amount in performance bonuses, as well as millions in shares vested. In addition, in the 2015, and 2016 financial years, he earned strategic bonuses of R20 million and R25m respectively.

Jooste also sometimes earned a bonus related to the successful conclusion of strategic projects. These were granted to him in 2014, 2015, and 2016 and were worth between R20m and R25m.

It was only for a lack of these bonuses in the 2017 financial year that his total remuneration package declined by some 8.3%. Every other year, it gained by between 17.5% and 31%.

Steinhoff’s financial results were published late in the 2017 financial year after Deloitte flagged accounting irregularities. As a result, between August 2017 and March 2019, Steinhoff lost 97%, or $21 billion (R406 billion at today’s rate) of its market capitalisation as investors reacted to the news.

Jooste, however, vested shares worth R111m at a share price of R70.11 that year.

The fallout, often called South Africa’s largest corporate scandal, also led to several directors being arrested, charged, and found guilty of contraventions of various laws.

A lengthy investigation by PwC into the firm’s spectacular collapse showed that a significant element of executives’ remuneration is performance related, including for meeting challenging targets, individual performance, as well as industry and market benchmarks.

This 7 000-page report, a copy of which Business Report secured through a Promotion of Access to Information Act request, explained that the remuneration committee met some three months into the new financial year and agreed salary increases, applying them retrospectively to the start of the new financial year.

As the report does not contain details for the 2018 year, it is not possible to see how Jooste fared in terms of his 2018 remuneration, if he earned one at all.

Potential bonuses are set on an individual basis each year based on a percentage of annual base salary, with the highest level possible being that of 50% of a base salary up until 2014, when it became possible for executives to earn 100% of their base salary as a performance bonus.

However, an examination of Jooste’s total income showed that he earned 100% of his base salary as a performance bonus for the financial years between 2013 and 2017 – the time period during which the investigation focused on remuneration.

Strategic bonuses, which Jooste earned in 2015 and 2016 were “awarded to an individual who contributed to the success of a certain project outside what is expected from that individual in the normal execution of her or his duties,” the report said.

In addition, share incentives were awarded to individuals who were key to driving the business strategy, needed to be retained, or were part of talent management and succession plans. In total, Jooste vested shares worth R375m and held shares worth R4.2bn by 2017.

Over the period of 2013 to 2017, Jooste was awarded R65m in strategic project bonuses, which included for deals such as successfully negotiating, executing, and implementing the Pepkor transaction, which was listed as a successful project in the 2015 financial year, PwC’s investigation showed. Pepkor now forms part of Ibex, which took over some of Steinhoff’s companies.

PwC, in stating that there were occurrences where proper paper trails for some of Jooste’s bonus payouts could not be found, noted that there instances in which some individuals who received large salaries were “remiss in the performance of their duties and did not act in the interest of Steinhoff”.

BUSINESS REPORT