JOHANNESBURG – Sizwe Nxasana, the chief executive of the FirstRand Group, earned a handsome R29.84 million during the financial year ended June 30 2014, the banking group’s latest integrated report reveals. That’s up from R12.7 million in 2008.
Nxasana’s fixed remuneration accounted for around R8.5 million of that amount, including retirement contributions of R891 000 and travel and medical allowances of R75 000. The remaining R21 million was made up of performance-based pay (R10 million) and deferred share awards (R11 million).
Considering that Nxasana steers a ship holding First National Bank (FNB), Rand Merchant Bank (RMB), WesBank and Ashburton Investments, his eye-watering remuneration package might adopt an air of reason next to Mike Brown of Nedbank’s R32.5 million, whose banking group’s market capitalisation is about half that of FirstRand’s.
Majority-owned by Old Mutual plc, the green bank’s chief executive earned R6.5 million in guaranteed remuneration last year, including cash, retirement contributions and “other benefits”. He was awarded a R7 million cash performance incentive, a R6 million deferred performance incentive (delivered in shares), an additional R13 million in share-based payments and R13 million in short-term incentives.
Next to Jacques Celliers, CEO of FNB’s R13.5 million pay package, you’d be forgiven for thinking this excessive. Although to be fair, both banking CEOs managed to grow earnings by roughly the same margin over the past year (in the region of 18%).
Appointed on October 1 2013, Celliers earned R5.5 million in guaranteed remuneration and an additional R8 million in performance payments and deferred share awards. This brought his total pay package to R13.5 million for the year, which includes earnings from July to September last year in his prior role as head of business banking.
As an added perk and as part of his long-term incentive plan, Nxasana was awarded a R48.4 million share appreciation right in 2008 (essentially a bonus linked to the appreciation in FirstRand’s stock over a certain period), which vested in 2011 and can be exercised until November this year. “In some cases the benefit derived this year represents five years of cumulative value aggregation,” FirstRand says in its report.
Standard Bank, Barclays pay packages
The co-CEOs of Standard Bank, Sim Tshabala and Ben Kruger, were paid R28.6 million and R28.8 million respectively last year. Their fixed remuneration packages were in the region of R8 million, with the rest accounted for by bonuses and share appreciation awards.
Barclays Africa CEO Maria Ramos was awarded a R28.7 million package in 2013, comprised of a fixed component of R6.7 million and variable remuneration of R22 million. Moneyweb published an article in April suggesting that this was inappropriate for under-delivery and generally poor performance on the part of the bank.
The talent trap?
The Big Four agree that top talent comes at a price and employees need to be incentivised to deliver high performance and value to shareholders.
In his letter to shareholders included in the report, Standard Bank chairman, Ted Woods suggests that the African growth story is more important than any “argument about remuneration”. Woods rightly points out that talent, skill and experience comes at a price, edged higher, he says, by limited supply and intense demand. These “market pressures” are driving remuneration for top talent toward “developed market norms”, he adds.
The other three hold to similar lines of thinking around remuneration of top executives.
Barclays insists that remuneration is performance-related and this determined against a “balanced scorecard, not any single target”, while FirstRand refers to “material risk takers”, which can expose themselves and the organisation to considerable risk in the course of conducting business (and should presumably be compensated for that).
Nedbank similarly seeks to align the needs, expectations and risk exposures of stakeholders (including staff) and to create “sustainable long-term value for each of these”.
Yet this stage is set in one of the world’s most unequal societies with some of its highest bank charges.
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