Chairman Gcabashe explains why Standard Bank used to have two CEOs
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.
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.