Investment company Sygnia, founded by Magda Wierzycka, is at the centre of a governance storm over a controversial plan to lavish about R600m in new shares on executives at a cost of just 1c, potentially without any performance conditions attached.
This is the most serious challenge yet to Wierzycka, often described as South Africa’s wealthiest self-made woman, who holds 43% of Sygnia, both directly and indirectly through Sapayoa Investments, worth R2.18bn. Her ex-husband, Simon Peile, owns 17%.
Shareholders will now vote on the new share scheme on October 23, but a number of them have told the FM that they plan to vote against it, describing it as “a serious abuse of minority shareholders” and unjustifiable “enrichment”.
In particular, Andre Crawford-Brunt, a former business partner to Wierzycka in the venture capital firm Braavos before the two fell out in January, sent Sygnia’s board an ultimatum last week on behalf of a group of shareholders.
“The board is asking shareholders to approve a [scheme] … without disclosing the quantum, timing or recipients of the awards, or any independent fairness opinion or benchmarking against peer schemes,” he said. The board must “withdraw the circular” and cancel the vote this week, failing which “an urgent application for the appropriate relief will be launched without notice”.
He described the plan as a “serious indictment of the board”, saying no explanation has been given for why Sygnia is essentially providing “free shares”.
In the 55-page circular, issued on September 25, Sygnia said it plans to issue an extra 10-million shares, on top of the 15-million already in the scheme, which will be used to “attract, motivate, reward and retain” executives.
Only 7-million of those 25-million shares have been issued, which means there are 18-million still to be issued. With the shares being offered at 1c each, and Sygnia’s current share price at R33.50, beneficiaries of those 18-million shares stand to get stock worth around R600m for virtually nothing.
Sygnia’s board has “complete discretion” to award someone up to 5-million shares, worth around R165m, without imposing any performance conditions. And if somebody is given more than 5-million shares, the board has the “sole and absolute” authority to set performance conditions, then decide if they have been met.
This, as one critic puts it, is tantamount to handing executives “a gift voucher with a vesting date”. The company’s governance, that critic says, is “like a waterproof teabag — it looks the part, but nothing gets through”.
In response to questions from the FM, Wierzycka says she sees the plan as necessary to hire and retain talent, adding that she has spoken to most of Sygnia’s large shareholders. “They have all indicated that they will vote yes. They are all supportive,” she says. “We do not envisage a problem in the resolution passing as there should be nothing controversial about it.”
Yet, even though Wierzycka herself is likely to be awarded a chunk of these new options, she is not excluded from voting in favour of the plan, which needs 75% support to pass.
Though detractors say it would have been better governance to recuse herself from voting, Wierzycka says if shareholders have concerns, that would reflect on her leadership. “If there is no confidence in my leadership, I would take that to heart in considering whether I should remain in this position or look for other opportunities,” she adds.
Asked whether a sceptical outsider might worry that the scheme could largely benefit her, she responds: “You either trust me or you don’t.”
This is a critical point, since some shareholders have told the FM that Sygnia’s plan — absent targets or detail — amounts to a vague message of “trust us; we’ll explain it later”.
“We’re very uncomfortable” about the structure, says one shareholder, who asked not to be named. “We are considering voting against it.”
Jean Pierre Verster, whose Protea Capital Management owns about 1% of Sygnia’s free float, describes these new terms, which amended the earlier share scheme, as egregious.
“This new scheme is very similar to earlier versions, where the transparency was just as poor. At this point, we are likely to vote against it,” he says.
One common complaint is that while Wierzycka says this scheme is needed to create “alignment with shareholders”, the fact that she already speaks for 43% of the shares, and earns a sizeable salary and dividends, should make her “aligned” already.
Wierzycka concedes that “no-one is confused about the fact that part of the scheme will be used to incentivise me”, but says this is necessary because she could resign tomorrow with just 30 days’ notice and sell all her shares.
“What is the board really asking? That I remain sufficiently tied in to continue creating value for shareholders. And that any other CEO that follows does the same,” she says. “If they do not believe I can create value, they have the freedom to vote no.”
She adds that Sygnia executives have not “been rewarded in any meaningful way for the value they created for shareholders, other than through bonuses”.
Anyway, she says, the new scheme would give Sygnia greater flexibility to hire new executives. “We have been looking for a chief financial officer for five months, and the cost of recruitment is staggering. Good people in senior positions are being retained through substantial incentives.”
Yet the revolving door for Sygnia’s top finance post — which has had three people filling the role over the past four years — speaks to a potentially deeper discontent.
In January 2023, Murad Sirkot resigned “to pursue other career opportunities”; in July 2024, after just 16 months, Nicki Giles stepped down without explanation; and then in March this year, Rashid Ismail did the same.
The scheme’s fuzzy terms also reinforce concerns around Sygnia’s commitment to transparency, after it barred the media from attending its recent AGMs.
Wierzycka defends this decision, saying that typically when journalists come to the company’s AGMs, most of the questions revolve around her political and economic views and have nothing to do with Sygnia. “We will invite the media for our next AGM,” she says. “You will discover they are very boring.”
