Bank CEO pay compared

FirstRand vs Standard Bank vs Barclays Africa vs Nedbank vs Capitec.
FirstRand group chief executive Johan Burger is the best-paid among CEOs of the Big Five banks.

On a total remuneration basis, as disclosed, FirstRand group chief executive Johan Burger is the best-paid among CEOs of South Africa’s five largest banks. Investec is deliberately excluded from this comparison as remuneration is in pounds, which skews it dramatically (after conversion). In 2016, the six CEOs (given Standard Bank’s joint CEO structure) were paid R163.4 million in guaranteed remuneration and short-term bonuses (generally paid in cash and shares).

Chief executive

Bank

Total remuneration

Johan Burger

FirstRand

R33.947 million

Sim Tshabalala

Standard Bank

R32.078 million

Ben Kruger

Standard Bank

R31.985 million

Maria Ramos

Barclays Africa Group

R29.509 million*

Mike Brown

Nedbank

R22.281 million

Gerrie Fourie

Capitec

R13.580 million

However, it must be noted that Maria Ramos was also given restricted share awards (along with 73 other Barclays Africa executives) to “retain skills critical to the Barclays Plc sell-down and beyond” (read more: Barclays Africa splashes R191m to retain execs in sell-down). This is valued at R8 million and is excluded from the total remuneration for the year disclosed in the group’s annual report and is also specifically separate from any other long-term incentives. This R8 million should arguably be added to Ramos’s total remuneration for 2016, in which case she would handily top the table at R37.509 million.

Remuneration packages for these executives comprised:

  1. Guaranteed package = Cash package + Retirement contributions + Other allowances
  2. Short-Term Incentive (STI) = Cash bonus + portion in shares (deferred or otherwise)
  3. Long-Term Incentive (LTI) = Shares awarded as part of various incentive plans

The third item on this list is excluded from the table above as while this is remuneration ‘paid’ during 2016, its future value is impossible to calculate. Some banks disclose the current face value of LTIs awarded, but this isn’t all that useful as these vest over time and will typically be exercised at varying strike prices. Aside from that, there are all manner of hurdles around matching rates which complicate matters further.

Chief executive

Bank

Guaranteed package

Maria Ramos

Barclays Africa Group

R14.509 million

Gerrie Fourie

Capitec

R9.830 million

Johan Burger

FirstRand

R9.617 million

Sim Tshabalala

Standard Bank

R9.198 million

Ben Kruger

Standard Bank

R9.105 million

Mike Brown

Nedbank

R7.781 million

From a guaranteed package point of view, Barclays Africa’s Maria Ramos is paid 50% more than the next best-paid CEO (Capitec’s Gerrie Fourie). Interestingly, remuneration on this basis for three of the five banks is clustered around the R9 million to R10 million range. Ramos is paid a portion of her package (R6.5 million) in the form of ‘role-based pay’ which Barclays Africa describes as a “unique element introduced to ensure that the remuneration of our executive directors, prescribed officers and material risk takers remains commensurate with market pay levels given the impact of European regulations”. The bank notes it “will be phased out once the Barclays Plc sell-down is complete and the new long-term incentive programme begins to vest”. Ramos’s role-based pay for 2016 was split 50:50 in phantom shares and cash. The phantom share restrictions lift over five years (20% per year), in line with the approach taken by former parent Barclays Plc.

FirstRand chairman Laurie Dippenaar took the unusual step of devoting two pages of the group’s 2016 integrated report to “additional commentary on remuneration”. He writes: “I have on many occasions in my statement attempted to explain in simple terms why I am comfortable with our remuneration philosophy. The rigorous health checks we apply are demonstrated below and, in my view, have been consistently applied through the years and have directly driven the outperformance our shareholders have enjoyed. The board is extremely cognisant of the levels of scrutiny required on compensation and we believe our frameworks stand up to scrutiny.”

Burger tops the charts on the variable component of remuneration, with a total of R24.33 million in 2016 (comprising a R13.165 million cash bonus and R11.165 million deferred in share awards).

Chief executive

Bank

Variable remuneration

Johan Burger

FirstRand

R24.33 million

Ben Kruger

Standard Bank

R19.269 million

Sim Tshabalala

Standard Bank

R16.1 million

Maria Ramos

Barclays Africa Group

R15 million

Mike Brown

Nedbank

R14.5 million

Gerrie Fourie

Capitec

R3.75 million

Capitec’s CEO was paid the smallest bonus (R3.75 million), in line with its remuneration policy. It describes its short-term incentive earning potential as “conservative to the market, supporting Capitec’s key remuneration principle of long-term alignment with shareholders”.

Source: Capitec 2017 integrated report

Another way of looking at remuneration, arguably, would be to calculate a grand total for the year, i.e. pay as disclosed above plus the value of shares vested and taken up during the year. This is disclosed separately by companies (sometimes as a note to the financial statements).

Chief executive

Bank

Remuneration

Value of shares vested, exercised during the year

Total

Gerrie Fourie

Capitec

R13.580m

R98.860m

R112.440m

Johan Burger

FirstRand

R33.947m

R28.504m

R62.451m

Maria Ramos

Barclays Africa Group

R29.509m

R27.238m

R56.747m

Ben Kruger

Standard Bank

R31.985m

R20.335m

R52.320m

Sim Tshabalala

Standard Bank

R32.078m

R10.701m

R42.779m

Mike Brown

Nedbank

R22.281m

R16.911m

R39.192m

Banks will surely argue that this is not representative of the total amount ‘earned’ during the year as most shares which vested and were exercised during 2016 were as part of long-term incentives awarded years ago (sometimes a decade or more). But, this calculation offers a view of the amount of money actually ‘taken home’ by CEOs during the year.

Because of Capitec’s remuneration policy (with dramatically smaller short-term incentives/bonuses and far larger long-term incentives (through share options and share appreciation rights), it is no surprise that Fourie tops this table. It must be noted that he has only been CEO since 2014. Based on the share price as at February 28, Fourie has a total of nearly R300 million (R295.1 million) in unvested and unexercised instruments.

Listen: Bank CEO pay: What’s fair in an unequal society?

Barclays Africa’s Ramos had 239 670 shares under award as at December 31, Standard Bank’s Tshabalala had 1 432 502 shares, Kruger 935 803, Nedbank’s Brown 239 016, while FirstRand’s Burger had 1 424 288 shares outstanding as at June 31 2016.

* Hilton Tarrant works at immedia. He can still be contacted at hilton@moneyweb.co.za.

* He owns shares in FirstRand, first purchased in July 2011.

* FirstRand’s 2016 financial year ran to June 30 2016.

* Capitec’s 2017 financial year ran to February 28 2017.

* Standard Bank, Barclays Africa Group and Nedbank’s financial years ran to December 31 2016.

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Awesome to see Standard doubling up like that. The shareholders must be thrilled.

Still absolutely no justification for these types of remuneration awards to the CEO’s – I find none of them exceptional in leading their specific brands.
If these remuneration packages are to retain these people in SA then the argument is weak as most would have to fight for jobs elsewhere and with Trump wanting to destruct banks structures and sizes the situation could get worse. These people need to have performance objectives that stretch their very existence and can’t be misinterpreted of skirted around. Remuneration must be hooked to medium and long term objectives no short term objectives

I disagree, these people are responsible for billions of profits and keeping a bank profitable is a especially difficult task. You will probably find the subsidiary CEO’s also take home a sizable salary.

South Africa’s financial sector has done very well in a very difficult economic and regulatory environment. I’m not sure how the actual quantum is decided but giving Burger a R20mil bonus doesn’t seem ridiculous if he is securing the overall business returns.

I don’t think it is simply keeping skilled people in SA but making sure they are relatively competitive on a global CEO scale which they are not even at these levels.

The CEO’s are not responsible as you say – they have a whole team of people operating in different segments of the markets and are normally headed up by astute business persons with a particular flair in their fields of expertise, and, in many cases the current CEO’s didn’t even employ them they well may have been a carry over from the previous regime

When you’re earning this kind of money, it’s a full-time job just figuring out how to use it.

why is investec not included, is majority of their revenue/profit in the UK or South Africa?

if they are overpaid because of the currency it should be noted.

The very second sentence!
“Investec is deliberately excluded from this comparison as remuneration is in pounds, which skews it dramatically (after conversion).”

yes hilton, thanks for the reply. was referring to the second sentence. It might be skewed dramatically because of rand pound conversion, but it should be noted.

Unless of course you believe that the underlying business is not comparable to the other South African banks.

Also, would be interesting to see the CEO pay in terms of a metric: Earnings, Dividends, Employee, Revenue or other criteria that would determine their worth.

My view is that Mein Herr should also be paid by Investec for ”other services rendered”, like when the period after Kebble died, JCI and Randgold held board meetings under Investec’s supervision, sometimes even in Investec Head Office ( sometimes attended by CEO Stephen Koseff), at a time Koseff, was also a director of the JSE —– never mind the so-called King Code (source N -189 – July 20150)

Those salaries are totally shocking, especially that I am pretty sure that those execs will never succeed in any other employement outside of RSA ! They are vastly overpaid for what they are capable of achieving. This is why majority of local companies lost terribly when they ventured overseas, our execs are no good !

End of comments.

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