Financial sector execs getting fatter cheques

Ann Cro y Moneyweb

Stellenbosch-based investment holding company PSG was the centre of much of last week’s market chatter, with commentators speculating wildly on how it planned to sustain its eye-wateringly generous, inappropriate and undeserved executive pay packages after it unbundles the bulk of its stake in Capitec.

“They’ll find a way, don’t worry,” said one weary and understandably cynical shareholder. The first thing will be a repricing of all the share options.

Midway through the week, the group announced its plans to offload 28.11% of Capitec to shareholders, leaving it with 4.3% of one of the fastest-growing and most profitable banks in South Africa.

The unbundling is in response to growing shareholder frustration about the widening discount between the PSG share price and the value of its component parts – in excess of 30% in recent months.

Not shy of resorting to a bit of hyperbole, the PSG executives likened their plan to that of Naspers’ trillion-rand unbundling of Prosus last year.

No doubt it is this sort of grandiose thinking that underpins the group’s consideration of remuneration matters.

At the end of the week, its annual financial statements revealed that the top three executives – chief executive Piet Mouton, finance director Wynand Greeff and executive director Johan Holtzhausen – got paid a total of R135.5 million. For 2018 financial year, remuneration for the three was R127.4 million.

In both years, the bulk of the value came from gains on exercising share options – R95.7 million in 2019 and R91.5 million in 2018. Mouton’s remuneration was R47 million in 2019, Holtzhausen got R45.1 million and Greeff received R4million.

The massive share option gains were made when the options were exercised in April 2019 at the comparatively attractive ruling share price of R265.

In what may – or may not – have been an attempt to calm shareholders’ frustrations about this generosity, PSG says in a note to the financial statements that the subsequent decline in the share price means the unvested share options are currently “significantly out of the money” and that the executive directors will be penalised if the share price does not perform over time – unless they’re repriced.

Of course even PSG’s largesse looks almost reasonable when stacked up against the huge amounts of money the top guys at Coronation Fund Managers pocket every year, almost without fail.

“They they probably don’t see that the millions being spent on Trencor’s underperforming board represents really bad value,” said one Trencor shareholder.