It was difficult not to feel sorry for Absa last week. Like every other company on the JSE, it is committed to long-term contracts with its executives and has no choice but to ply them with previously agreed generous salaries and share awards.
This means the bank will be just the first of a long list of companies to disclose rather lavish executive share allocations during the coronavirus crisis. Standard Bank should be releasing similar details any day now.
Perhaps this is why the banks were so slow to respond, first to the SA Reserve Bank’s urging on dividend payments and executive bonuses, and then President Cyril Ramaphosa’s pay-cut ‘suggestion’.
For a remarkably long time – in the context of the lockdown’s freezing of time – they held out, seemingly unaware of how tone-deaf they appeared.
Standard Bank is not reducing anyone’s pay as a result of the pandemic, a spokesperson told Moneyweb on April 1.
“The bank’s remuneration committee aims to ensure that executive remuneration is externally competitive, fair and responsible and the committee is cognisant of the current extraordinary efforts by management to act in the best interests of our customers, our people, our shareholders and society at large, at this challenging time,” said the spokesperson, echoing the sentiments of most of the big banks.
It remained committed to that stance until April 12.
Nedbank’s Mike Brown was the first to break ranks in a commendable move that eventually forced ‘buy-in’ from all the big banks.
The reality of course is that we’re not all in this together – many are battling for enough food to stay alive, some of us are battling for our livelihoods, while a lucky few are battling for their contracted share awards.
Need for scrutiny now even greater
This means there is now even greater need for close scrutiny of remuneration policies and practices, which makes it all the more critical for the JSE to enforce reasonable engagement standards when it comes to companies hosting their annual general meetings during the lockdown. There must be no tolerance for the sort of AGMs announced by Anglo American and Mondi.
Companies with their primary listing on the JSE should be required to use the sort of interactive electronic platform made available by the exchange in conjunction with The Meeting Specialist.
Now is not the time for boards to be avoiding uncomfortable and probing questions from shareholders.
The notion that the world will be fundamentally changed by the coronavirus and the comprehensive response it triggered has probably been overstated. After all, not a lot has changed since the 2008 global financial crisis.
Certainly more bank-related regulations have been introduced across the globe but on the critical issue of the allocation of the value created by the economic system, there hasn’t been too much change. The dominant characteristics of that system remain excessive levels of executive remuneration, massive share buybacks and increasing inequality. All of which has been accompanied by a growing sense of frustration and anger among those left behind.
Coronavirus could be a game-changer
Remgro chair Johann Rupert, who has long believed that the free-market system is not working as it should, thinks Covid-19 could be a game-changer. “This isn’t just a pause, it’s an entire reset of our economic system,” Rupert told the Financial Mail recently.
That may be, but the last time there was a fundamental change in the global economic system was after the utterly destructive Second World War (WWII).
Too often the majority of us just want to return as quickly as possible to whatever looks like normality – no questions asked.
Talking about Remgro, its decision not to vote on RCL Foods’ repurchase of 14 million shares from executives is to be commended. The decision was taken in the wake of some vociferous opposition by shareholder activists who were not only concerned by the uniquely favourable treatment being granted to the lucky executives, but angered – given their chronic underperformance – that they were in line for any sort of bonus. Mind you, allowing for the general level of shareholder apathy, there’s still a good chance the repurchase resolution will get the necessary votes to go ahead.
Discovery has implemented a number of useful initiatives since the Covid-19 crisis reached our shores, so it’s rather sad to see the sustained pounding suffered by the share price. It has recovered from the recent low of R54.50 but CEO Adrian Gore’s derivative position continues to look remarkably uncomfortable. On Friday the company announced that 18.6 million of his shares – valued at R1.7 billion – had been pledged for the funding of R303 million worth of preference shares.
Bidcorp’s trading update for the nine months to end-March provided a useful perspective on the impact of the coronavirus across a range of markets from Europe to Africa, to Australasia and China. While China looks to be in recovery mode, Bidcorp was expecting worse to come in most other regions.