Naspers | Governing the discount

We rank Naspers' (JSE: NPN) corporate governance as ‘good' with a score 3.03 out of 5 (FY '18: 3.05). Based on our ESG risk framework, NPN's ESG risk exposure is “moderate”, with a residual risk rating of 2.8 out of 5.

Within a South African context, the NPN ownership structure (A-shares) and tenure of directors is contrary to established corporate governance guidelines. The ownership structure has enabled the Group to make long-term investment decisions in several assets, most notably Tencent which accounts for c.132% of NPN's market value. Similar control structures are prevalent in other large tech firms, notably, Alibaba, Alphabet and Facebook. In our view, additional disclosures and improved earnings performance from core assets mitigate potential accountability concerns. We believe the balance of power on the Board can be improved by adding international diversity, internet experience and appointing a new lead independent non-executive. We remain mindful of including board members familiar to the business. However, external influence can be valuable. NPN's strategic execution, post the Multichoice unbundling and pending listing of Prosus, will also benefit from a board with international and internet experience. 75% of NPN's current board members are South African, despite a 1% exposure to South Africa by gross NAV.