Mondi tops share incentive rankings
PACKAGING and paper group Mondi had the best-paying share incentive scheme in the 2012 financial year, according to data collected by Who Owns Whom.
Its 2009 long-term incentive plan has borne fruit for its executives, two of whom top the list of largest gains on shares.
CEO David Hathorn cashed in the chips he received through the incentive plan for R54-million and Peter Oswald, head of Mondi’s Europe and international division, cashed in his for R37-million.
Finance head Andrew King was paid R19-million for his shares, earning him seventh place on the list of the share options royalty.
They did not receive these rewards by being part of the furniture — Mondi’s remuneration committee set stringent performance conditions for the incentive plan four years ago, including that total shareholder returns beat the median performance of peer companies over three years.
“Mondi’s total shareholder return exceeded that of most of its competitors in the international paper and packaging sector over the performance periods,” Anne Quinn, head of the remuneration committee, wrote in its 2011 annual report.
Hathorn, Oswald and King would have made a lot more, but a profitability target was not met and 66% of their longterm incentive packages lapsed because of this.
AVI boss Simon Crutchley was the third-highest earner from share options, banking almost R26-million for his performance at the consumer goods group. Gold Fields head Nick Holland, whose bloated pay package has drawn the ire of unions in the mining sector, was fourth at R25-million. This suggests that waiving his bonus, which he offered to do earlier this year for his role in the mining company’s much maligned empowerment deal, would not hurt him much.
In fifth place was AngloGold Ashanti’s Mark Cutifani, with the value of his paid-out options placed at R23-million. His colleagues Srinivasan Venkatakrishnan, Ron Largent and Robbie Lazare collectively banked R42.9-million.
AngloGold Ashanti also had stringent performance condi- tions and its 2011 annual report shows the executives missed out on 30% of the full payout because they failed to meet, or only partially met, safety and production targets.
Although share incentives can be lucrative — the top 20 collectively cashed in almost R370-million last year, nicely padding bank balances along with salaries and short-term bonuses — there is doubt about their effectiveness.
“There is still too much focus on short-term financial performance,” said Tim Anderson, executive consultant at 21st Century Pay Solutions, a reward consultancy.
“Short-term financial performance can be manipulated by executives by cutting out longterm value-adding investments. The short term will look good, but long-term performance and sustainability could suffer.”
In a piece recently published on BizNewz.com, Bernard
❛ They did not receive these rewards by being part of the furniture
Swanepoel, former CEO of gold miner Village Main Reef, hit out at executive incentives.
“During my very first month as a miner I received a R10 voucher as a safety reward,” he wrote. “Imagine: not killing or hurting anybody in my team for a month entitled me to go and buy a kilogram of fillet at the local butcher in Springs!
“Would I have not done my job, or would I have done it less well had I not been incentivised? This has always been my problem with incentives — the implied insult that I would not or will not give of my absolute best, unless paid for it.”
Academics agree. After conducting research on the financial services industry, Bruce Kogut, leadership and ethics professor at the Columbia Business School in New York, concluded that rewarding people to do more may be based on a false idea of what motivates people.
Kogut suggested that executives might care more about status — perks such as the corporate jet, country club membership, or giving to charity.