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Corporate Literacy

Critical Analysis of Coca Cola Beverages South Africa’s BEE Inspired Transfer of Additional 10% Shares to Its Employees – C2C Corporate Literacy Initiative

Brian Kazungu

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Brian Kazungu, 08/02/2021

Following an announcement by Coca-Cola Beverages South Africa (CCBSA) that it had transferred an additional 10% shares to its employees, members of the Connections2Communities (C2C) community using the theme What Is A Company, discussed the meaning and implications of such a move.

Critical points in the Press Release by Coca Cola were that:

  1. The 5% stake already held by employees will increase to 15% following the newly announced additional 10%.
  2. When including other partners with a BEE tag, Coca Cola Beverages South Africa will now be 20% black owned.
  3. It was also announced that Trade Unions will have the power to appoint two trustees to serve in the Board of Directors on behalf of the employees.
  4. According to CCBSA Managing Director, Velaphi Ratshefola, this was more than merely a scheme with financial benefits to workers but rather a real empowerment as employees will have Board Member representation.

Below is a corporate literacy discussion between members of C2C in their search for a shared understanding on matters of interest as well as in their pursuit for corporate excellence.

[2/7, 15:01] Mr Mawere: CORPORATE LITERACY 101 – Case Study 100. Corporate Identity under the spotlight.

It was announced that Coca Cola Beverages SA (CCBSA) would transfer an additional 10% of its shares to its employees.

What is nationality and identity of CCBSA?

[2/7, 15:13] +263 77 299 6425: Nationality of a corporate depends on its registration. If CCBSA is incorporated in SA then it will be regarded South African. However the parantage (DNA) of the company may reflect a strong line of foreign blood. Hence the reason for a purported black empowerment drive.

[2/7, 15:38] +263 77 603 2475: If employees are shareholders I would benefit by understanding how trade unions appoint directors. Whose interest will those directors serve? If any employee wishes to realize part of their shares as an individual, is that possible and if so when and how? These are question around what a company is.

[2/7, 15:48] Mr Mawere: Do you agree that a company is a creature of law? It is the company and not its relatives that exists as a separate and distinct entity. If the above is accepted, the CCBSA is a South African corporate citizen. Once incorporated, its umbilical cord is cut.

[2/7, 15:51] Mr Mawere: The announcement is clear. A trust whose beneficiaries are the employees will hold the shares. The trustees will be appointed by the founders to act on behalf of the employees who stand to benefit.

[2/7, 15:55] Mr Mawere: You ask, whose interests will the directors serve? As you may be aware, directors owe a duty of care to the company they serve. They owe no fiduciary duty to shareholders.

The trust will be entitled to two directors but once the directors are appointed, they cease to represent the trust but the company they serve.

Remember that the directors are part of the company and they possess the power and authority to act on behalf of a company.

[2/7, 15:58] Mr Mawere: You ask if any employee wishes to realize part of the shares as an individual and in so doing expose the need for this group. The correct construction is that employees are not shareholders in the new structure.

It is the trust that has a direct nexus to the employees. In turn, the trust is the registered holder of shares in the company. In short, none of the employees would be registered as direct shareholders of CCBSA.

[2/7, 16:47] +263 77 603 2475:

1. Shareholding. Very correct insights from a legal standpoint and yes, the beneficiaries are the trust which will hold shares in the company.

 The benefit to employees is indirect, and short of a dividend, an employee might get nothing out of this arrangement.  This is an empowerment scheme in which 15% has been issued to a trust not to employees.

Employee interests are now in the hands of the trust. An employee might never realize the benefit possible through leveraging shares as he deems fit in order to buy his family a home or feed himself during pension when he ceases to be employed?

The point is we need to be aware of these potential drawbacks as relates employee freedom of ownership of shares.

2. Directors

He who pays the piper calls the tune. The trade unions appoints these guys and therefore can disappoint them. The director therefore know who the master is. 

The article itself acknowledges that the employees would now chart the future of the company. Is that not implication that the newly appointed directors will bring in employee input onto the board?

I agree with the basic legal interpretation but have expounded further implications as I see them.

[2/7, 17:04] +263 77 299 6425: Yes I do agree but the cutting of the umbilical cord is somehow dependent on structure. In our case we have CCBSA which has a parent CCBAfrica which runs the affairs of the company in East and Southern Africa. In such a conglomerate set up, the operations of CCBSA may not be entirely independent of its holding parent.

The reason for the increase in the stakes for employees is something to digest also. It was meant to meet the provisions of the BEE Act as the government holds back the license for merger. It’s not a voluntary offer per se. There’s a forked tongue in the deal.

Brian Kazungu is an Author, Poet, Journalist, and Technology Enthusiast whose writing covers issues to do with Business, Travelling, Motivation and Inspiration, Religion, Politics, and Communication among others. https://www.amazon.com/author/briankazungu https://muckrack.com/brian-kazungu http://www.modernghana.com/author/BrianKazungu [email protected] @BKazungu-Twitter He has written and published several books covering various aspects of human life including leadership, entrepreneurship, politics, personal development as well as poetry and travel. These books are found on Amazon https://www.amazon.com/author/briankazungu

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