Today the CEO, Cats, has left Telit.
Trust between shareholders and the company is fundamental. Cats lied to the company and the company failed to disclose relevant information to its shareholders.
Cats was paid $3.37 million in 2016 made up of $1.63m salary and bonus of $1.74m. ShareSoc remuneration guidelines suggest £300k to £500k as a guideline for a company of this size c £250 million turnover. Cats owned 16 million shares and also has share options. So, such a large pay package was unnecessary. It is a sign of weak corporate governance that he was able to demand to be paid so much. Remuneration is often a window on the soul of the company. It certainly was in this company, but most investors and analysts had not spotted this.
Manifest, the corporate governance experts, in its Annual Governance Review of Telit spotted numerous concerns. Of particular note:
Shareholders may wish to note the lack of gender diversity. Greater diversity creates boards which are better suited to face the business challenges whilst also having the impact of improving corporate governance. A diverse board will harness a range of skills and different perspectives which will assist a company in responding to an uncertain business environment.
Chicco Testa serves as the Board’s Executive Chairman. The QCA Code recommends that the chairman must have adequate separation from the day-to-day business to make independent decisions. Save in exceptional (and well documented) circumstances, the Chairman should not also fulfil the role of Chief Executive.
The maximum percentage dilution allowed under any of the company’s share schemes in any rolling ten year period exceeds the 10% figure recommended by institutional investor guidelines, standing at 15%. The potential level of dilution should all outstanding share awards/options vest is considered to be high at 12.9%.
Due diligence of AIM has yet again failed the market and shareholders. So either the London Stock Exchange has failed to adequately monitor NOMADs or the remit needs changing so NOMADs are better monitored.
My thoughts are also reported in today’s Evening Standard: https://www.standard.co.uk/business/stock-market-under-fire-over-scandal-at-israeli-firm-telit-a3611101.html