Today's Labour News

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graphdown thumb medium90 80BusinessLive reports that until early January 2018, employees of Resilient were laughing all the way to the bank, but with the sharp drop in the value of Resilient’s share price, employees’ profit on their share investment has turned into a devastating loss.  

For years, the property company has lent its workers loads of money to buy its own shares.  The R630m debt on the 8.4m outstanding shares in the scheme wasn’t a problem when, as at June 2017, this debt was comfortably covered by the shares, which were valued at just over R1bn.  But at the end of March 2018, the value of the shares had slumped to R419m, about R210m short of the debt owed.  High-profile reports critical of Resilient, and released in January, touched on the possibility that the company used employee share purchasing to bump up the share price.  "In general it’s regarded as bad practice and it’s poor corporate governance," said PwC’s remuneration specialist Gerald Seegers, who also referred to the commercial risk.  According to Seegers, it is no longer common practice.  But, if the Resilient share price doesn’t recover to at least R75 within the next few years the employees will be in a nightmarish debt trap and could find themselves working just to repay the loan on their scheme.  Leaving the company for fresher debt-free pastures might also not be an option as it’s likely to trigger repayment of any outstanding debts.

  • Read this report by Ann Crotty in full at BL Premium (paywall access)
  • Read too, Resilient defends employee share plan, at BusinessLive

Get other news reports at the SA Labour News home page