Facile justification for odious pay hikes
SOME CEOs seem to lose their marbles when confronted by a journalist asking them questions beyond, say, their return on equity.
Last month, Adcock Ingram CEO Jonathan Louw refused to answer questions from journalist Sikonathi Mantshantsha, saying: “When last did you write anything positive about me or Adcock? When you reflect on that, call me back.”
Louw just didn’t get the fact that the media’s role is to reflect critically on business, rather than lob powder-puff questions about the CEO’s favourite single malt and how bristlingly smart his team is. And this bluntness is catching. This week, Anglo American Platinum (Amplat) CEO Chris Griffith was asked about criticism of Amplats’s decision to lavish R76.4million in options on 12 executives while it refuses to yield on the R12 500 minimum wage demand.
“Am I getting paid on a fair basis for what I’m having to deal with in this company? Must I run this company and deal with all this nonsense for nothing? I’m at work. I’m not on strike. I’m not demanding to be paid what I’m not worth,” Griffith said.
Griffith, who took home R17.6million last year while Amplats had a R1.5-billion loss, seems to think he is underpaid.
Still, you have to applaud him for having the chutzpah to say what he thinks. If other CEOs had half the nous to defend their pay so honestly, it could spark a real debate.
And Griffith, lest we forget, is actually a highly rated engineer. Unlike many cookie-cutter accountants who rise to the top due to inertia rather than anything else, Griffith is mentally acute and seemingly right for the job.
Ironically, Griffith was on the other side of the debate when he was CEO of Kumba Iron Ore, another Anglo American subsidiary.
In May 2011, shareholder activist Theo Botha went to Kumba’s AGM, and asked why Griffith was paid “only R4-million for a company turning over R38.7-billion and achieving a 95% rise in operating profit”. Botha said this left Griffith open to being poached.
Yet today, Griffith is being painted as the grasping capitalist, defending the indefensible at a raw time for workers fighting for 0.8% of what their CEO gets paid.
Tracey Davies, a lawyer for the Centre for Environmental Rights, said his attitude was “astonishingly arrogant and patronising”.
“We work with mining-affected communities all over South Africa, and the attitude of people like Griffith is an insult to the dignity of these people,” she said.
Davies said someone with those views shouldn’t be running a company dealing with “such extraordinarily difficult social and economic problems among its employees”.
But at least Griffith was willing to wade into the debate. Even if the arguments are self-serving, facile and have not been stress-tested.
It’s an argument you’ll hear bleated by most remuneration committees when tackled. They’ll talk of these salaries as necessary to “retain rare skills” amid a “talent shortage”.
Last month, a former head of JP Morgan Cazenove, Robert Pickering, wrote a letter to the Financial Times dismantling that exact same argument, which had been mounted by Barclays CEO Antony Jenkins.
Jenkins had argued that he had to hike bonuses for Barclays executives by £200-million despite a 32% plunge in profits, fearing that if he didn’t, they’d quit and the bank could then collapse into a “death spiral”.
Pickering snorted at this, describing it as a “tired old cliche”.
“I cannot think of a single example of a well-established firm ceasing to exist because of staff defections, although there are plenty of examples of firms going bust in bull markets because of poor management and excessive leverage,” he said.
Management, he said, perpetuated this myth to justify higher pay.
The SA public has become desensitised to clubby remuneration committees justifying odious pay hikes by citing the “dearth of talent”.
One stockbroker shrugged this week: “It doesn’t seem to be such a problem when it comes to appointing another member of this club.”
He was referring to Shoprite, which had no problem appointing Adrian Basson, son of CEO Whitey Basson, a director at the age of 29. That same year, Shoprite also appointed Jacob Wiese, son of chairman Christo Wiese, at the age of 24.
Finding talent apparently isn’t a problem as long as your surname is Wiese. And if it really is such an awful problem in other cases, perhaps executives should broaden their search beyond the country club.