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Casparus Treurnicht, a research analyst and portfolio manager at Gryphon Asset Management, said there is a global movement against excessive senior management and director compensation.
“I do think the payment structure is skewed since the share price declined over the last year and still management earned good amounts on what should be a bigger variable component attached to shareholder gains.
Perhaps the ‘fixed’ component carries too much weight; management coined it last year and this year still got handsome payments,” he said.
Kwanele Ngogela, a senior inequality analyst at shareholder activist group Just Share, said changes to Capitec’s remuneration policy reflected a growing awareness among investors that wage differentials in the South African labour market remain unjustifiably high. “Shareholder disgruntlement and demand for greater accountability and transparency on executive pay is justified,” he said.
Ngogela added that South African shareholders do not have an effective say on remuneration policy and its implementation. “Shareholders’ votes remain non-binding advisory votes.
The Capitec case, in which the implementation report wasn’t passed in two consecutive years, shows the subsequent engagements with dissenting shareholders were insufficient to change the approach of remuneration committees. This will not change unless the Companies Act is amended to provide shareholders of listed entities the right to cast a binding vote on remuneration.”
Chris Steward, sector head of financials at Ninety One, said that the Capitec chair and remuneration committee had heard shareholder concerns and made amendments to the policy should be seen as positive.“
Shareholder concerns revolved around the discretion exercised regarding the vesting terms of long-term incentives in the face of declining financial metrics, due to exogenous factors deemed beyond the control of management, specifically the Covid-19 pandemic.
Capitec was not alone in this regard, with a number of its peers proposing similar discretion.” The other concern of shareholders was the degree of challenge in targets underlying long-term incentives, Steward said, adding: “Both concerns have been addressed by changes to the remuneration policy.”
Executives typically receive long-term incentive compensation in the form of cash, equity and shares, depending on the performance of the company’s share price.
Meintjies said Capitec extended an invitation for engagement to dissenting shareholders to understand their objections and the rationale for their votes.
“Although this invitation was unfortunately not taken up, the remuneration committee had the opportunity to meet several of our larger institutional investors later during the financial year to continue the discussion on our remuneration policy and implementation.”
The Public Investment Corporation which owns 16.5% of Capitec shares, declined to comment other than to say it engages directly with the boards of investee companies about matters relating to executive remuneration. Lebashe, which owns about 7% in Capitec, referred questions to the bank.
Lebashe Investment Group owns Arena Holdings, publisher of the Sunday Times.
Capitec, which serves 20-million customers, said for the year ended February 2023 headline earnings a share jumped 15% to R9.7bn. The bank paid R6.2bn in dividends, up from R3.2bn in 2022.
However, it reported an 80% rise in credit impairment charges due to the “normalisation of the credit loss ratio after the Covid-19 pandemic”.
Fourie told Business Times that consumers’ salaries were shrinking due to high inflation, and rising interest rates.
“Within our 20-million clients, we saw a 20% increase in the cost of home loans … purely because of the interest rates. We see a 15% increase in vehicle finance. We see food going up by 8% and fuel going up 16%.
“That groceries went up only 8% is because people are buying down. We are seeing the effect of the higher cost of living and interest rates on the expenses of our clients.”
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