Chair­man Gcabashe ex­plains why Stan­dard Bank used to have two CEOs

Business Day - - COMPANIES & MARKETS -

Stan­dard Bank bit the bul­let this week and fi­nally named Sim Tsha­bal­ala sole CEO af­ter four years of shar­ing top spot with Ben Kruger. Busi­ness Day spoke to Stan­dard chair­man Thu­lani Gcabashe about a move that many re­gard as over­due.

There’s still a view, es­pe­cially among a lot of black pro­fes­sion­als, that Stan­dard Bank wasn’t brave enough to ap­point a sole black CEO from the start. How do you ad­dress that per­cep­tion?

That’s far from it. I was on the board at the time, so I can speak with first-hand knowl­edge. You’ve got to re­call where we were: we’d been build­ing up as an emerg­ing-mar­kets bank, buy­ing up com­pa­nies in Rus­sia, Turkey, etc, and we’d come to re­alise the im­pact of the post­fi­nan­cial cri­sis world [wasn’t] con­ducive to us try­ing to be an emerg­ing mar­kets bank. We needed to fo­cus on Africa, [which] was a big part of our busi­ness any­way.

Now, the com­plex­ity of that tran­si­tion was quite mas­sive. Add to it the fact that we were putting in a to­tally new core bank­ing sys­tem for the South African busi­ness … and it be­came clear that you needed not just two bod­ies, but you needed the dif­fer­ent skills sets that they had, which were quite com­ple­men­tary. As it worked, the per­son­al­i­ties were such that we got the best from them. The bank is in a very dif­fer­ent place now; we’re con­clud­ing the core bank­ing trans­for­ma­tion this year. Our Africa busi­nesses con­trib­uted as much as 30% to head­line earn­ings – so what we started back then is more or less on course.

It was never clearly an in­terim mea­sure when you first an­nounced it. But with Sim’s ap­point­ment this week, Stan­dard Bank made as if it had al­ways had this suc­ces­sion plan in place.

We didn’t put our­selves un­der that pres­sure as a board to say this is an in­terim or tem­po­rary po­si­tion. But once we achieved what we needed to do, you would want to move to­wards a sin­gle [CEO]. We didn’t sort of have a model that we were fol­low­ing.

What are Sim’s per­for­mance ob­jec­tives now?

Well, it’s to run the group. Sim has been run­ning SBSA, as well as be­ing joint CEO. So, there are no new KPIs. Ev­ery­body on exco now re­ports to him. Some peo­ple on the man­age­ment com­mit­tee will con­tinue re­port­ing to Ben as ex­ec­u­tive di­rec­tor; and again, that’s for now. It’s not as though there’s any­thing new for Sim, other than he takes full re­spon­si­bil­ity.

Can Stan­dard Bank jus­tify the amount of money it paid, hav­ing two CEOs from 2013? R320m in salary, perks and per­for­mance re­wards?

It’s an is­sue I think the re­mu­ner­a­tion com­mit­tees across SA look at very care­fully.

Re­ally?

They ab­so­lutely do. I think you have to look at what value has been cre­ated as a start and you must an­swer the ques­tion of whether you are get­ting value for money. You have to con­sider that Stan­dard Bank is a multi­na­tional busi­ness, it’s in 20 African coun­tries, with rep of­fices else­where in the world; it’s got 54,000 em­ploy­ees and it’s a com­plex busi­ness. So, the ques­tion is, do the peo­ple run­ning this en­tity – not just the two CEOs, but the whole ex­ec­u­tive – do they de­liver the re­sults we ex­pect? And the an­swer is yes.

If we talk about cre­at­ing value, Stan­dard Bank’s shares, are only up about 33% since March 2013, when Sim and Ben were named CEOs. It could be ar­gued that share­hold­ers are not the ones mak­ing the money, it’s the ex­ec­u­tives. How do you jus­tify that kind of re­mu­ner­a­tion?

Well, you have to be look­ing at your mar­ket all the time and whether your ex­ec­u­tives are per­form­ing to the level you want. We’ve been in­vest­ing heav­ily in our IT sys­tems and in our Africa fran­chise, and that’s an in­vest­ment for the fu­ture, so we are ex­pect­ing now to reap the ben­e­fits. So, if you take the last four years, we’ve had higher-than-nor­mal ex­pen­di­ture on IT if you com­pare us to our com­peti­tors. I think to [deal] with the com­plex­ity as ex­pected, for a fu­ture ben­e­fit is re­ally what we’ve asked of the ex­ec­u­tives. We’ve walked through this with our share­hold­ers and ex­plained this.

Banks, to a large ex­tent, have mo­men­tum of their own. How much in­flu­ence, re­ally, do the ex­ecs have?

I could never agree with that, ab­so­lutely never. I’ve just talked to you about trans­form­ing a bank and that doesn’t just hap­pen. Com­pe­ti­tion is all over – other banks, fin­tech, and we’re an old in­sti­tu­tion and we have to be rel­e­vant to the times. If you aren’t, you’ll dis­ap­pear, so there’s a lot of work to be done.

But it does seem that bank ex­ec­u­tives are among the best paid across in­dus­tries. Isn’t there a con­ver­sa­tion you need to have about this?

We do that con­tin­u­ously. I mean, the low­est-paid worker is be­tween R12,000 and R15,000 a month; I think we stack up very well. If you have an ex­ec­u­tive re­spon­si­ble for CIB in a bank like ours, that in­di­vid­ual is op­er­at­ing in SA, all over Africa, as well as to some ex­tent our op­er­a­tions in the UK. And it’s the kind of per­son who would be mar­ketable glob­ally. So, when you look at com­par­ing what they’re earn­ing, you have to look at how at­trac­tive [the pack­ages] are to other mar­kets. The hon­est truth is if you were not pay­ing what the mar­ket’s pay­ing, it’s quite un­likely you’d re­tain [tal­ent].

So, you feel your 2016 ex­ec­u­tive salary bill of R209m is fair?

I am cer­tain it’s fair for the value de­liv­ered.

GIULIETTA

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