Difficult to swallow

Whatever faux-scientific way you spin it, it is impossible to make a payout of £55m to the chief executive of SABMiller seem reasonable

SABMiller CEO Alan Clark is a top executive. He has worked for SABMiller for 25 years, the last three of them at the very top of the organisation. But Clark is not worth £55m. There’s nothing personal about that; at a push I can think of about four CEOs across the globe and across the decades who might deserve that sort of payout. Clark is not one of them.

A sum of £55m — or R1bn — is what Clark is expected to get when Anheuser-Busch InBev’s acquisition of SABMiller is completed within the next four or so months. (Assuming Brexit does not derail the deal.)

No doubt in a bid to make it sound not quite so outrageous, the SABMiller remuneration committee will point out that a large chunk of the payout is because Clark has piled up 341,886 shares which were awarded to him over the years; they’ll be worth £33m when the megamerger is completed.

The remaining £22m is the early exercise of share incentives as a result of the change of control at SABMiller. In addition, we’re told, Clark has worked for SABMiller for 25 years. This is said as though Clark didn’t get paid for those years; but he did, and he got paid handsomely for every one of them.

Then the remuneration committee might want to point out, in that “external-locus-of-control” way in which such bodies operate, that it really wasn’t up to them. It was the market that determined Clark’s package.

As with all the other excessive packages, we’re encouraged to regard the enormously wealthy executives and their conniving remuneration committees as hapless victims of a global market-driven system as though that so-called market was not itself a contrivance.

And, we’re told, there was an improvement in the share price under Clark’s watch, which should make all shareholders happy. Happy enough that they mightn’t even vote against the group’s remuneration policy at the upcoming and final AGM.

But whatever faux-scientific way you spin it, it is impossible to make the £55m seem reasonable. Even if sterling fell to half of its pre-Brexit levels the payout would be unreasonable.

Clark’s payout encapsulates most of the things that are wrong with executive remuneration. It is excessive, random, crafted by cronies and appeals to the weakest link in 21st-century shareholder capitalism: the short-term fixation of disengaged institutional investors. It is part of the reason there’s such disquiet about globalisation.

Under the “random” category it is worth pointing out that in financial 2016 Clark’s pay was cut by 17% (to R120m from R140m the previous year). Not because he had slacked off. Clark was penalised because emerging market currencies weakened against the dollar.

SABMiller reports in dollars but 70% of its sales are in developing markets, so the group’s adjusted earnings were down. By no stretch of the imagination can Clark, or anyone in his management team, be held responsible for global currency movements.

It might be less of a stretch, but it is still a stretch, to claim Clark and his team deserved so much of the benefits of AB InBev’s acquisitive obsession. Clark was certainly around at the time Meyer Kahn, Graham Mackay and Malcolm Wyman drove SABMiller’s growth strategy, the one that led it directly into AB InBev’s sights. But being in line for a R1bn reward for that is almost random.

Like so many of his boardroom colleagues, Clark will benefit enormously from AB InBev’s globalisation plans. Not everyone will. Based on AB InBev’s track record, thousands are likely to lose their jobs or be downgraded as the merged entity attempts to generate the returns needed to justify the deal.

And we wonder why, just three days after SABMiller released the details of Clark and his colleagues’ pay, a small margin of Brits voted to leave the EU. For too many the costs and benefits of globalisation are too randomly allocated. See Editor’s Note June 23-29