Shareholder of JSE-listed companies are becoming tougher on executive remuneration amid the weak economy.
At Old Mutual’s annual general meeting (AGM) held in May, 46percent of shareholders voted against approving the company's remuneration policy, while 69.13percent voted against approving the company's remuneration implementation report.
Absa Group performed better at its AGM: only 11.04 percent of shareholders voted against approving the company's remuneration policy, while 31.43 percent voted against the company's remuneration implementation report.
Last week, Absa said its chairperson, Wendy Lucas-Bull, and the chairperson of the remuneration committee, Alex Darko, would engage with shareholders in a telephone conference on July 25 to enable them to raise their concerns or make recommendations about the company's remuneration implementation report.
Old Mutual said with regard to the non-binding advisory resolutions, ordinary resolutions 6.1 and 6.2 - the remuneration policy and the implementation report, which received less than the required 75 percent of votes - it would directly engage with shareholders, the timing of which would be advised to shareholders in due course.
Shareholder activist Theo Botha said shareholders might feel that executive pay was too high and result in a vote against implementation.
“If you look at the banking sector, in particular, some chief executives take home a total remuneration of around R60million a year, including some benefits and bonuses. Shareholders might look at the company's share price performance and see the remuneration not matching the company's performance,” Botha said. In light of South Africa's low economic growth it was difficult for companies to justify paying executives huge salaries.
“In a country which also has a high unemployment rate, with the banking sector facing new entrants to the market, profits are squeezed and shareholders might feel the executive pay is also not justifiable under these economic conditions,” he said.
David Loxton of Africa Forensics and Cyber said there were a number of possible reasons for shareholders not supporting these resolutions.
“Insufficient disclosure on the rationale for the remuneration policy and amounts recommended - in other words, it was not sufficiently clear why the executives would be paid the not-insignificant amounts and bonuses,” Loxton said.
He said that incentives were not based on results over a sufficiently long period to show they were actually linked to performance.
“For example, I have seen companies where executives cut costs by not investing in maintenance, and the results look great in the short term, and they get their bonuses. They then move on, and the next guys have to catch up and spend a fortune on maintenance and look comparatively bad,” Loxton said.
Last year, former Old Mutual chief executive Peter Moyo’s total remuneration for 2018 increased by more than 48percent to R50.57m from the R34.08m he received in 2017. His total pay for the year included a guaranteed remuneration component, short- and long-term incentives, an Old Mutual managed separation plan, dividends and “distributions” from Nedbank and Quilter.
Retired Absa chief executive Maria Ramos’s total package was R29.7m in her final year at the financial services firm, which was low compared with other executives in the sector.