Bruce exit averted
It almost looked like a Bruce exit (Brexit) was on the cards at Old Mutual’s AGM this week, until a brewing shareholder revolt was quelled.
The issue: the pay package for incoming CEO Bruce Hemphill, which had riled critics.
In the end, the intervention of the influential UK research group Institutional Shareholder Services saved the day for Old Mutual’s board. They recommended that shareholders vote “yes” to the pay deal — a position which more than 90% of shareholders decided to follow.
Danuta Gray, the head of Old Mutual’s remuneration committee said that because Hemphill is focused on a single project which will take several years (the managed separation of the Old Mutual group into four standalone businesses) it made sense to focus incentives on one large award once the project has ended.
But it is the size of this payout which has raised eyebrows. If Hemphill is successful, he could score 1,000% of his salary in an exit payout of £9m.
The AGM was just one of Old Mutual’s many hurdles this week, following the unexpected Brexit vote which led to the company’s share price being hammered in London and on the JSE.
Speaking to the Financial Mail, Hemphill says Brexit might indeed affect the performance of the underlying businesses, not least because of increased market volatility. But Brexit won’t affect Old Mutual’s strategy, he says.
The move of global markets towards a “risk-off” approach has led to a weaker rand against the dollar, even though the pound weakened against most other currencies. The average value of the rand year to date is down 22% compared with the first half of 2015. Old Mutual revealed too that volatility in other African currencies will also hit its earnings for the first half of the year, which are due out on August 11. There were other headwinds, such as the one-off expenses in Old Mutual Wealth UK which had to cap the fees in its socalled “heritage” (legacy) book. And in SA there were larger than expected claims from Mutual & Federal and the employee benefits business. The recent losses at Ecobank, which is 20% held by Nedbank, did not help either. Old Mutual chairman Patrick O’Sullivan confirmed that former finance minister Trevor Manuel will become chairman of Old Mutual Group Holdings (OMGH), the holding company for Old Mutual Emerging Markets and Nedbank (in which the group owns 54%). OMGH will almost certainly list in its own right as part of the managed separation process. Hemphill says that once this SA-based holding company is listed it could make sense to distribute the 37% of Nedbank which OMGH holds directly to shareholders, keeping the 17% held by the Old Mutual Life Assurance Company SA, which is part of its statutory capital. Hemphill says the group continues its phased reduction of its 65.8% holding in OMAM US, the Boston-based institutional asset manager.