Hodnett declines Barclays ‘kick downstairs’ and quits
• Dissenting voices at annual general meeting vote against the way banking group rewards executives
Barclays Africa’s departing deputy CEO David Hodnett turned down the opportunity to lead the group’s corporate and investment bank, in all likelihood seeing it as a demotion from his previous role.
“He was offered the job,” Barclays Africa chairwoman Wendy Lucas-Bull told Business Day at the banking group’s annual general meeting (AGM) on Tuesday.
This is its first AGM since the Barclays plc sell-down.
Lucas-Bull could not comment on Hodnett’s reasons for declining the offer. She said Barclays Africa would now move forward with appointing a new CEO of its corporate and investment banking to oversee the unit’s current joint heads, Mike Harvey and Temi Ofong.
When Hodnett’s two-month sabbatical was announced early in April, speculation was rife that he was on his way out.
Hodnett’s role as head of SA banking was done away with as part of a strategy and management shake-up to better align the group with its post-Barclays future. Returning as CEO of the corporate and investment bank might have seemed like a step down for Hodnett, who in his previous role was responsible for both that bank and the retail and business bank in SA.
Arrie Rautenbach, formerly the bank’s chief risk officer and head of strategy, is now heading up the retail and business bank in SA.
That the length of Hodnett’s handover period will run until the end of August is an indication of the broad scope of his previous role. He is credited with driving far greater collaboration between the group’s two largest units, which operated fairly independently of each other during the Barclays plc years.
At the same time, the new group structure seeks to remove red tape. Heads of the four core business units — corporate and investment banking; retail and business banking SA; wealth, investment management and insurance; and rest of Africa — will report to CEO Maria Ramos.
Shareholders, however, have expressed concern about Hodnett’s departure.
“We thought he was good and the market liked him too,” said Allan Gray portfolio manager Simon Raubenheimer.
“It’s always disappointing to see the departure of an executive of the calibre of David Hodnett,” said Neelash Hansjee, a portfolio manager and analyst at Old Mutual Equities. “We are concerned about the depth of management at a senior level at such an important juncture for the group.”
Barclays Africa will rebrand as Absa Group Ltd by July, embarking on a refreshed strategy now that it is unchained from its British parent.
Hodnett’s resignation was “quite negative for Absa”, analyst at Avior Capital Markets, Harry Botha, said. “It probably indicates that he did not agree with the group’s strategic direction, which was finalised recently.”
But having been with the group for 10 years, including as chief risk officer and financial director, it may have been that Hodnett, 48, had his eye on the top job. Someone with his ability and experience will probably be snapped up by a rival, or a new entrant into banking, such as Discovery or MTN.
The telecommunications company hired Stephen van Coller, then head of corporate and investment banking at Barclays Africa, in October 2016. He is now heading digital services.
It was not appropriate to appoint a new CEO at Barclays Africa at this time, said LucasBull. Colleagues had endorsed Ramos during the year-long process to redefine and implement the group’s strategy.
Disgruntled shareholders, including Old Mutual and Allan Gray, voted overwhelmingly against Barclays Africa’s pay policy on Tuesday.
The asset managers say the policy is opaque and does not clearly link executive pay with shareholder value-creation.
At the bank’s first annual general meeting since the Barclays plc sell-down, investors holding nearly half of the shares represented voted against the way in which the bank implements its remuneration policy.
In terms of the King IV code on corporate governance and JSE listings requirements, companies must subject their remuneration policies, as well as reports detailing the implementation of those policies, to two separate shareholder votes.
Tuesday’s vote, although nonbinding, is the first clear indication of how Barclays Africa’s minority shareholders feel about the way the group rewards its executives.
At the 2017 annual general meeting, Barclays plc still held 50.1% of the voting rights. This has since been reduced to 14.9%, underlining the extent of dissenting voices. The remuneration policy has been a sore point for years, given that its share price has lagged those of peers.
This suggests executives have not created shareholder value in line with their rewards.
“Paul [O’Flaherty] and I commit to engage further with shareholders and will get back to them on a series of matters that have been raised,” Barclays Africa chairwoman Wendy Lucas-Bull said at the meeting.
O’Flaherty is chairman of the remuneration committee.
Of the 76.3% of share capital represented at the meeting, shareholders holding 47.4% voted against the remuneration implementation report. Nearly a quarter (23.5%) voted against the remuneration policy.
It is likely that the Public Investment Corporation, the second-largest single shareholder with 6.16% of shares, countered the pay policy. This could not be confirmed.
Old Mutual Investment Group, which holds a 3.56% share, voted against implementation, as it could not see the link between value creation and executive remuneration, said Robert Lewenson, head of environmental, social and governance engagement.
“The targets which apply to the performance share awards made during 2017 are not disclosed and we couldn’t determine the stretch of those targets,” Lewenson said.
Long-term performance awards including incentives relating to the Barclays plc separation, made up more than half of total remuneration, yet targets were not disclosed, said Harry Botha, an analyst at Avior Capital Markets. “If the targets are too easy to achieve, it could incentivise management to be overly conservative.”
Barclays Africa’s executive remuneration was “the worst of the big South African banks” in structure, quantum, disclosure and alignment with shareholders, said Allan Gray portfolio manager Simon Raubenheimer.
Barclays Africa CEO Maria Ramos earned R29.95m in 2017, split evenly between fixed and variable remuneration.