Co-CEOs are laughing all the way to the bank
STANDARD Bank has awarded its two chief executives packages valued at R28-million for their efforts last year, when the bank reported flat profits.
Ben Kruger and Sim Tshabalala took over from Jacko Maree in March last year, which means they were in the job for only nine months.
The combined R56-million cost for the two CEOs dwarfs the R18-million that was awarded to Maree in 2012 when he did the job solo.
Senior executives David Munro and Peter Schlebusch were awarded R36.6-million and R26.6-million respectively for their efforts in 2013.
The sharp hike in remuneration costs may cause consternation among shareholders, and is likely to outrage bank customers who, according to the Boston Consulting Group, are paying among the highest bank charges in the world.
These steep charges underpin exceptionally high returns on equity enjoyed by South African banks.
To address shareholders’ concerns, who approved the bank’s remuneration policy at its AGM last year, Ted Woods, chairman of Standard’s remuneration committee, provided a lengthy explanation in this year’s annual report for the generous packages.
In his Warren Buffett folksystyle letter to shareholders, Woods’s explanation for the packages includes the African growth story, the global financial crisis, increased regulation and that developed-world bankers are paid so much.
“Beyond all argument about remuneration, however, the African giant is moving and growing. Critical to its growth is effective banking, intermediating and carrying the life blood — savings of finance — to feed economic growth and consequent human employment and incomes.”
The implicit suggestion is that if Kruger and Tshabalala are not paid R28-million each, the African growth story could be under threat.
Woods refers to the damage caused by the global financial crisis, which highlights the skills imperative in banking. “There is simply no substitute for knowledgeable people”, he writes. Again, Woods seems to overlook evidence that many individuals involved in the financial crisis were both knowledgeable and experienced.
And then there’s the additional regulations and governance demands that emerged from the financial crisis, which have added “another deep but unavoidable layer to the skills imperative,” contends Woods.
This suggests a further justification for generous pay packages, seemingly unaware of the obvious irony that additional rules are needed to rein in wayward bankers.
As Woods sees it: “Managing large banks, controlling complex risks... the entire spectrum demands people who bring specific knowledge, skills and experience. Securing them is a top challenge for banks in Africa. The pool is shallow. Demand is intense. The price for talent will respond as a consequence.”
Because of these factors, pay levels for South African talent had been driven towards “developed market norms”, he argues — seemingly unaware of public anger in those markets.
In considering executive remuneration, Woods and his committee were assisted by no less than six teams of consultants: PwC, PwC Remchannel, Global Remuneration Solutions — Mercer, Employment Conditions Abroad, McLagan and Towers Watson.