Discovery executives earn combined R210m

SOUTH Africa’s leading medical insurer Discovery’s top nine executives were paid a combined R210 million in salaries, bonuses and other benefits in the 2016 financial year, a big jump from the R144m they pocketed from the previous year.

This as Discovery’s headline earnings declined from R5.2 billion to R3.6bn, which the company attributed to “the accounting treatment from the acquisition of Prudential’s remaining stake in the UK joint venture in November 2014”.

The company’s new investments shot up by 22 percent, bringing in R16.2bn and it invested R823m in new initiatives for the year – this was financed by both debt and rights issue. The group’s normalised operating profit went up 11 percent to R6.4bn for the year, while normalised headlines earnings increased 7 percent to R4.3bn for the period under review.

Leading the way was the group’s chief executive, Adrian Gore, who took home a handsome R18.5m in total earnings for the year, up 38 percent from the R13.4m he earned last year, according to the company’s 2016 annual report. His earnings included a basic salary of R5.8m, a performance bonus of R3.6m and R7.8m in a phantom scheme bonus.

The company’s chief financial officer, Richard Farber, followed suit having earned total earnings of R14.8m for the year, up from R11.3m from the corresponding period.

In June the group said Farber would be vacating his positions as chief financial officer and group financial director with effect from December 31. These figures, however, pale in comparison when measured against the R100m earned by Whitey Basson, outgoing Shoprite chief executive for the year under review. Basson’s pay cheque included R49.7m basic salary and R50m in one-time performance related bonus.

Discovery said the phantom scheme bonus was paid to retain critical skills within the business. “This incentive plan links directly to the group’s performance based on the growth in the share price. The plan is primarily intended to attract and retain critical employees,” the report reads.

Discovery said its remuneration policy was approved by 78.38 percent of its ordinary shareholders at the company’s annual general meeting held last year.

However, the hike in remuneration comes at a time where the medical aid industry is under fire for its projected steep increase in member contributions next year. In September Discovery Health Medical Scheme announced a weighted average increase of 10.2 percent for its members, while Momentum Health members will face a weighted average increase of 11 percent.

On Tuesday the King IV Report on Corporate Governance tightened the requirements on remuneration for companies.

The group’s share price rose 0.51 percent yesterday to close at R115.82. It had increased 1.52 percent year-on-year.

Leon Louw, a director at Free Market Foundation, said that what was important was that the remuneration of executives was determined ultimately by the shareholders, and not by the executives themselves.

“If Gore is able to increase Discovery’s profits substantially, the shareholders would only be happy to pay him enough to keep him at their company. The amount the executives get is irrelevant, what is important is that they get paid what they are worth,” Louw said.

Theo Botha, a shareholder activist, said that if executive pay was according to the key performance indicators the company had set, then all was above board.

“If shareholders were in favour of the company’s remuneration policy, the only problem if a majority of shareholders had expressed their displeasure at the policy,” Botha said. – Kabelo Khumalo