CEO’s R19m bonus queried
SANTAM: SECOND BEST-PAID BOSS IN INDUSTRY
Major concerns raised about the independence of remuneration committee.
Anumber of questions have been raised about a R19 million cash bonus paid to Santam chief executive Lizé Lambrechts last year. The bonus was paid under the group’s outperformance plan (OPP), one of its five long-term incentive plans.
Because of this payment, Lamprechts was the second best-paid executive among listed insurance companies – and the bestpaid South African-based one – with remuneration totalling R36.077 million last year, if one includes the value of long-term incentives which vested in the year.
Shareholder activist Theo Botha is urging investors to vote against the insurer’s remuneration policy and implementation report at the company’s annual general meeting.
Last year, 13.1% of shareholders voted against Santam’s remuneration policy, significant given that Sanlam owns 58.94% of the short-term insurer.
Botha says the disclosure around the OPP has been opaque since its implementation and that the benefit awarded to the chief executive and financial director is “excessive”.
He adds that in its 2015 integrated report, Santam “highlighted that the maximum payment under the OPP would be 200% of TGP [total guaranteed pay]”.
He argues that in 2016, this “maximum payment level was increased to 600% without any reasons given”.
Botha argues that “shareholders were unable in 2015 to consider and vote on the grants and whether or not these were in line with their interests”.
He says he would “recommend that the board withdraw the awards granted to the CEO and CFO, and if the benefits have already been paid out, they should be claimed back”.
Santam argues that the 200% was not changed to 600%, rather that the “maximum payment is 200% of TGP for every year of the period, and over the three-year measurement period therefore amounts to 600%.”
Financial director Hennie Nel did not receive any bonus under the OPP last year as his measurement period is five years. The two also have different hurdle rates in their performance measures.
For the chief executive, the minimum hurdle is “annualised real growth of 10% based on normalised NIR [net insurance result] for 2014”, while the hurdle for 100% vesting is annualised real growth of 20%”.
For the finance director, the minimum hurdle is “annualised real growth of 6% based on NIR for 2014”, while the hurdle for 100% vesting is annualised real growth of 9%.
Botha is sharply critical of the use of normalised NIR for the hurdle.
He contends that in 2016 and last year, the hurdle was only described as growth in NIR. Using this measure, “the results would’ve shown that no growth occurred under the CEO’s watch”. Nel’s hurdle is still described as growth in NIR.