Capitec flagrantly interferes with its own remuneration policy

Highlighting the whimsical nature of executive pay, notwithstanding the armies of consultants employed to make it appear scientifically precise.
Ivory-tower thinking … when determining whether executives’ performance measures were met, the group simply decided to ignore 2021. Image: Siphiwe Sibeko, Reuters

Capitec’s remuneration committee has come up with the ideal solution to Covid-19 and all the lockdown agony that wreaked havoc with our personal, social and economic lives.

It’s pretending it didn’t happen.

Of course this isn’t a strategy that will work well for the vast majority of people – including Capitec’s own customers, whom chair Santie Botha acknowledges have experienced financial hardships – but it appears to work extremely well in the world of executive remuneration.

The inhabitants of this world are sheltered from the real world by remuneration committees and remuneration consultants. And by a shareholder accountability process designed with nothing more than virtue signalling in mind.

Not a lot of humility here

It turns out the majority of shareholders were not persuaded by the hard sell contained in the group’s remuneration report, including the “key management value creation” chart which suggests the group’s excellent performance has little to do with the work of its 14 664 employees.

The shareholders were evidently not comforted by the fact that although a coach-and-horse has been driven through the remuneration policy, the “remuneration philosophy remains unchanged”.

But here’s the thing, although an unprecedented 51% of Capitec shareholders voted against the group’s implementation report at Friday’s AGM, the vote will have no consequences.

This is because the two votes on remuneration – on the policy and on its implementation – are what’s called ‘non-binding advisory votes’.

Virtue signalling

This means the institutional shareholders who dominate the JSE landscape can, on behalf of millions of workers and savers, take a ‘principled’ stand against excessive executive pay without having to worry that it might have consequences.

Hence the remuneration votes provide an excellent opportunity for virtue signalling without fear of consequences.

The fact is that executive pay in South Africa – as well as UK and US – would not be the problem it is if institutional shareholders did not enable it.

It’s probably no coincidence that the senior executives at these institutions also enjoy extremely generous remuneration packages.

All that flows from the 51% ‘No’ vote at the Capitec AGM is an obligatory engagement between the board and shareholders. Mind you, taking a broader perspective it’s not impossible that the Capitec situation will influence current discussions about beefing up the Companies Act and shift beyond the non-binding advisory votes on remuneration.

Simple solution

So when considering the executives’ long-term incentives due to vest in 2021, here’s how Capitec’s remuneration implementation report dealt with the Covid-19-related destruction:

“The Remco [remuneration committee] decided that, for the 2018 grants of SARS [share appreciation rights] and options for which the performance period ended in the year under review [to February 2021], the vesting of the awards will be determined based on the pre-Covid-19 performance.”

Without that dramatic interference the long-term incentives would not have vested.

The Remco added that it believed this approach was in the best interests of the company because: “It results in a fairer outcome and rewards our executives for their excellent performance during the initial two performance years as well as their tireless and ingenious efforts for the year under review.”

These “tireless and ingenious” efforts were evident in the recovery of the Capitec share price and the company’s ability to pay out dividends, says Remco.

The necessary but dramatic change seemed to come effortlessly to the Remco. When it came to determining whether the long-term incentive performance measures that were set in 2018 and due to vest in 2021, Remco merely explains that “the 2021 financial year was not considered”.

As a result of this Alice-in-Wonderland-type approach 50% of the share options and share appreciation rights awarded to the CEO and CFO in 2018 vested in 2021.

Another simple solution

Capitec’s Remco also jiggered around with the group’s short-term incentives.

Back in September 2020 it realised the original headline earnings per share targets “would not adequately motivate the kind of performance required to address the challenges brought on by the pandemic”. It decided headline earnings would be “more appropriate”.

Most other JSE-listed companies, including the big banks, respected the ‘in-flight’ performance targets that had been set ahead of Covid, with some allocating special Covid payments to their executives to compensate for the non-vesting of short and long-term bonuses.

In Capitec’s case the decision to ignore 2021 when determining whether performance measures were met ensured executives did get hefty bonus payments.

CEO gets R49.3m, CFO R33.3m

CEO Gerrie Fourie was given a short-term bonus worth R4.3 million and long-term incentives valued at R31.8 million. His total package for the Covid year was valued at R49.3 million – not quite as generous as the eye-watering R72 million he received for 2020, but significantly more than it would have been if the Remco hadn’t stepped in to game the system.

The group’s CFO AP du Plessis received a short-term bonus of R3.4 million and a long-term incentive payment of R19.8 million, taking his pay for 2021 to R33.3 million.

No doubt Capitec has been one of the star performers on the JSE for several years and the original management team has introduced a formidable competitor to the local banking sector.

However, the flagrant interference with its remuneration policy in order to guarantee generous payments to its executives indicates the whimsical nature of executive remuneration notwithstanding the armies of consultants employed to make it appear scientifically precise.

‘Dangerous precedent’

Bishop Jo Seoka, chair of Active Shareholder, a not for profit company that helps socially responsible shareholders to exercise their company rights, says the interference sets a dangerous precedent.

“It means policies can be manipulated to suit certain individuals and/or circumstances

“Why have a policy if it can be flagrantly disregarded? What does this say to the ordinary employees of Capitec?”

No tweaking for ordinary employees

Before the vote on Friday board chair Botha told shareholders the Remco had to ensure that pay is aligned to performance and that all staff remain motivated.

And despite the significant changes required to ensure executives were paid short and long-term bonuses, Botha said the group’s overall remuneration philosophy “remains unchanged and fit for the achievement of long-term strategic targets”.

Read: Capitec results show scarily uneven impact of Covid-19 (Oct 2020)

‘Disappointingly low’ vote

After the meeting Remco chair Danie Meintjes told Moneyweb that the 48% vote for the implementation report was “disappointingly low” and that in hindsight it might have been a mistake not to have actively canvassed shareholders ahead of the meeting.

Explaining the unprecedented action by the Remco, Meintjes said: “We have an extremely competent and experienced senior team leading Capitec that did an extraordinarily good job in leading the organisation through the uncertainties of the pandemic.”

He said they took note of the shareholders’ response and “will arrange specific sessions with shareholders to get their input and discuss their concerns”.

Botha and Meintjes also benefitted from Remco’s largesse, with the former enjoying a 33% hike in fees to R2.5 million and the latter getting a 19% hike to R880 000.

Seoka told Moneyweb the Capitec situation demonstrated the need for the ‘real’ shareholders to be involved in the governance of companies in which they are invested and not to merely relegate their responsibilities to a few large institutional fund managers.

“Activism is critically important if we are to eliminate these unethical practices,” said Seoka.



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Oh dear there are a few negative stories coming out of SA’s favourite people’s bank at the moment….has ‘big bank” rot set in? When the big boys start looking after themselves and leave the rest behind.,it’s usually the beginning of much bigger trouble. Shareholders be warned!

Seems most directors – even of struggling companies – are legends in their own minds.

Also look at Tyme Bank or Arcinvest.

I sold my shares after seeing the ridiculous directors share incentive schemes.

Yep, vote with your shares, there are many great transparent companies out there. No need to bother with the ones you would not p on if they caught fire

Or is there a more simple explanation – why should the ANseers have a monopoly on “snout in the trough”.
Management has been snouting for a long time – actually I now think it is a human trait and in a managerial position you do whatever you can get away with. And seeing that you can make the rules and your buddies on the board share in the largesse (and appoint the commision that advises thereon) – the sky’s the limit.

When the market is prepared to pay a 40 multiple while the other banks are trading at 9, the execs have got to be doing something right?

It would be a good idea to show the public what these execs earn per year plus share options.

And then the public should decide where to bank or not bank.

I do not see the Tyme Bank shares rise very soon with ridiculous share options awarded to the directors. It is so high that it looks impossible for any share holder to ever make a profit.

Plus no CEO Bank should earn more than R20 million per year.

The surplus of the profit should go to the company or share holders (The owners of the company)

Shareholders got R1.85bn in dividends excluding capital appreciation /recovery… cR80m in shares and cR7m in cash to the skippers seem relatively inconsequential. Lol, on what basis do you arrive at an arbitrary R20m?

Lol sure,

a normal person/customer can be more “open” to “inconsequential” exec pay perhaps if ANY of these highly specialized skippers ever repay those when the “ship sinks”.


Or, the one is a rating for a highly profitable loan shark and the others are rated as banks

If my quick calculation is accurate, then the total remuneration of the CEO is 0.8% of the total dividend payout for 2021. If he worked for free, then the dividend will increase by less than 1 percent. This brings us to the question – how much would the dividend be if there was no CEO?

He is expensive, but he adds more value than all South African parliamentarians combined.

The better question would be : Is the Capitec CEO better than 99% of all other Baccalaureate Graduates in SA ?

Not only that, is it not better to hire 100 Ceo(s) instead of one Ceo for the same money?

Speculator : That is with respect nonsensical !!!
Can you imagine 100 CEO,s having to be consulted for decisions !!!
Asseblief !

Viva la Grey

Viva la Grey College

Well done Gerrie!

By that logic we should tolerate tapeworms. I mean really, they only suck 0.001% of your blood, so no real harm.

You made a very good point there!

It would be helpfull if only for the sake of comparison to compare Capitec executive pay with other banks that are equal performers.

Consultants earning their huge fees….

End of comments.



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