Questions over MMI rewards

Continued liberal use of retention payments and multimillion rand golden handshakes by MMI’s remuneration committee should ensure a large portion of the insurance group’s shareholders will vote against the remuneration policy again at this year’s annual general meeting.

Continued liberal use of retention payments and multimillionrand golden handshakes by MMI’s remuneration committee should ensure a large portion of the insurance group’s shareholders will again vote against the remuneration policy at the annual general meeting.

The rewards enjoyed by the executives looked particularly inappropriate in the context of a share price that was trading at around its 2013 level, one fund manager said.

A hefty 52% of outside shareholders voted against the remuneration policy in 2016.

Shareholders might take comfort from the fact that CEO Nicolaas Kruger received no short-term incentive for 2017 when underwriting losses and weak investment returns knocked diluted headline earnings. However, subsequent to the June year-end, Kruger and his fellow executive directors were awarded one-year retention payments.

Essentially the payments will make up for the nonawarding of short-term incentives. There is no indication of performance requirements attached to the payments, only that the executives will receive the payment if they remain employed by the company until end June 2018.

The retention payment is referred to in a footnote in the remuneration report, which is contained in the integrated annual report. But it makes no reference to the amount of money involved.

A company spokesman said that although the retention payments had been approved in principle by the remuneration committee the implementation was still in process.

“We do not yet have finality on how many of the senior management will be prepared to accept the conditions attached to the agreement. As a result, we cannot yet quantify the total amount of the retention payments or who the participants are in the arrangement.”

Details would be disclosed in the 2018 remuneration report.

For his performance in financial 2017 Kruger was awarded R17.5m, 24% down on the R23.3m he was awarded for 2016. Thanks to the vesting of long-term performance incentives awarded in earlier years, he received R21.9m in 2017.

Another area of shareholder concern is the awarding of generous loss of office and restraint of trade payments. In financial 2016 former finance director Preston Speckmann received R10m as a loss of office payment following his resignation in June 2015. The latest remuneration report shows Preston received R10.9m in 2017, which “relates to a restraint of trade payment”.

Santam announced in February that Speckmann had been appointed to its board.