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Executive remuneration survey: Miners strike gold in SA pay stakes

Bankers and cellphone barons left behind.

JOHANNESBURG – Mining and resource magnates took home more pay than cellphone and banking bosses in 2010.

That is just one conclusion of a Moneyweb survey of the remuneration of the directors of the top 20 SA companies by market capitalisation.

We reported on Thursday that Whitey Basson of Shoprite (JSE:SHP) was by far SA’s best paid executive.

That package included Basson’s exercising an option to purchase 10m Shoprite shares at R6.51, compared to the value of R62 at the year end.  Under IFRS accounting it was reported as a cost of R594.5m but that value accrued over decades.

Meanwhile our figures for the other 19 companies focus purely on pay and benefits. We have explained that share option schemes are often not comparable. The benefits they confer stretch up to ten years and present values mean little because stock markets are unpredictable.

But even if Basson’s share options are excluded, his basic salary and benefits package of R32.1m exceeded that of the runner up among SA executives – Mark Cutifani of AngloGold Ashanti (JSE:ANG) – by nearly R10m.

Cutifani earned R22.4m excluding share options even though the company recorded a loss last year. Cutifani is credited with steering AngloGold out of its hedge book fiasco, also adding substantially to the company’s proven ore reserves.  PwC says AngloGold’s remuneration is above the median but in line with global pay levels in the mining sector.  Pay takes account of gold production, cost control and resource-to-reserve conversion.

AngloGold’s generosity extends to the lieutenants. CFO  Srinivasan Venkatakrishnan was paid R16.6m. The ten executives shared R118m, which made them the most expensive executive team in the top 20.

Cutifani was followed in the pay stakes by third-placed Pat Davies of Sasol (JSE:SOL), whose remuneration doubled to R20.6m. In our previous survey Davies was the worst remunerated of big company CEOs. Neville Nicolau of Anglo Platinum (JSE:AMS) came in fourth with R19.85m.

Another Anglo company, Kumba, is highly profitable but mean towards its executives, so mean that this was one question that shareholder activist Theo Botha wanted to put to the Anglo AGM from which he was excluded.

The CEO Chris Griffith earned only R4.4m – the second lowest package after the R4.1m of Nku Nyembesi-Heita of Arcelor Mittal.  Kumba’s entire board cost only R12m – less than 0.2% of its taxed profit.

Botha argues that Anglo is only as good as its operational bosses and is concerned they could be poached. He finds it interesting that AngloGold can pay so much better now that it is no longer controlled from London.

The cheapest executives in SA, at least by salary and pension benefits, are Johann Rupert of Remgro (JSE:REM) and Koos Bekker of Naspers (JSE:NPN), neither of whom takes any salary at all. Rupert is, however, kept in the style to which he is accustomed by his £4.8m (R52.4m) salary at Richemont – see note below*.

MTN (JSE:MTN) has yet to report for the year to December, which means the salaries reflected are old news. The report will become available only three weeks ahead of the late June AGM, in other words, at the end of May – six months after the year end!

We reported last week that Sizwe Nxasana of FirstRand (JSE:FSR), Maria Ramos of Absa (JSE:ASA) and Mike Brown of Nedbank (JSE:NED) each earn nearly double the pay cheque of Standard’s Jacko  Maree’s,  even though Standard is still biggest by assets, profits and market cap.

Bloomberg incorrectly published that Maree earned R57m last year because it miscalculated the value of options on 500 000 shares granted. It turns out these were out of the money to the tune of R10 a share and theoretically had a negative value of R5m.

Even in its disguised correction Bloomberg churlishly reported that Standard’s earnings and share price performance had lagged two of the other banks, taking care to focus on the short term.

Under Maree in the past ten years, Standard’s market capitalisation has grown from R39.5bn to R170bn, an average compound growth rate of more than 17% pa. Taking dividends into account shareholders have had a return of more than 20% pa.

In rand terms Stephen Koseff and Bernard Kantor of Investec (JSE:INL) did best among the bankers, with packages of £2.66m (R29m) each. Investec shareholders paid R58m in CEO pay, when the share price has gone nowhere in five years, indeed is down from over R100 in June 2007 to R51.55 now.

The table relates the total directors’ pay and benefits to taxed profit. In 12 of 20 cases the cost of leadership is less than 1% of taxed profit.

Harmony and AngloGold are conspicuous as loss makers in the table. While ArcelorMittal’s CEO and its executives are lowly paid, profits last year were underwhelming, so that leadership here cost 5.4%

So, how do the executives of formerly-SA companies do, relative to their local counterparts?

Some say the rand is “strong” but SA CEOs are poorly paid in rand terms compared to their colleagues in companies that once were previously  headquartered in SA.

The table shows that, in rand terms, Richemont’s (JSE:CFR) Norbert Platt was by far the best paid with a package of R100m. Platt has resigned for health reasons.. The package, unlike those in SA, does include share-based payments.  Richemont also pays Johann Rupert’s salary.

Worst paid in this illustrious company is Anglo’s Cynthia Carroll with a meagre £1.6m (R17.5m). She earns considerably less than the CEOs of former subsidiaries Anglo Platinum and AngloGold Ashanti. Her great rival, Marius Kloppers of BHP Billiton (JSE:BIL), earns three times more than Carroll.

*2009 annual report. All figures exclude share awards, etc

SAFFERS’ PAY OVERSEAS

* Error:

Alarmed that the tax man might descend on him, Johann Rupert, chairman of Richemont and Remgro has hastened to correct an error in Moneyweb’s survey of the pay of SA’s top executives on Friday.

We said he received no remuneration from Remgro but 4.8m sterling from British American Tobacco.

At the weekend he informed us that the cheque must have been intercepted, as “I have not been paid by BAT since 1993/1994”.

It turns out that the 4.8m sterling payout came from Richemont and Rupert donated it all to charity. We regret confusing the two companies.

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