Executive incentive structure

Recent articles in the media on share-based payments structures in listed entities

It apparent that many listed companies are struggling with their executive incentive structures and strategies. The disillusionment created by these structures is creating more harm than good.

Below is a selection of companies who require assistance with their remuneration structures.  

Apart from the conflict of interest issue, Old Mutual has another hot potato involving Peter Moyo – his pay, and that of other executives

The cold numbers are that Moyo’s remuneration was R50.5m last year. This included a fixed salary of R8m, short-term bonuses of R7.1m, a R13.7m “distribution” from Old Mutual’s unbundling of Nedbank and Quilter Plc, and a R15.4m payment under the “managed separation incentive plan”. This last payment is curious, since the “separation” between Old Mutual, Nedbank and Quilter was conceived by Moyo’s predecessor. One of the shareholders who voted against the implementation report was Old Mutual Investment Group (OMIG), a subsidiary of the wider group.

Financial Mail | Rob Rose

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Reality cheque for execs

Like a disturbing number of remuneration schemes, Steinhoff’s encouraged executives to take risks and buy businesses regardless of the price. This provided the CEO with the scope to manipulate figures to ensure that he met remuneration targets. Steinhoff’s remuneration scheme encouraged executives to take risks and buy businesses regardless of the price. It is possible in the short and medium term to manipulate results to attain performance targets that describe “long term” as three to five years.

Financial Mail | Ann Crotty

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Beware the clawback provision

Clawback provisions will be used to justify even more generous bonuses. there’s no reason why the executive, who may have contravened all that corporate governance guff about ethical behaviour, would not use a portion of his bonus to pay lawyers to prevent the company from getting its hands on any of it. We’re not talking petty cash or even 13th-cheque generosity here — bonuses frequently triple the value of an already hefty basic remuneration package.

Financial Mail | Ann Crotty

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SA’s tech sector: It used to outperform the Top 40, but risky share structures and dodgy projects brought that to an end.

Several of the largest players were undone by projects that went horribly wrong, as well as risky shareholding structures that ended up devaluing these companies. The collapse in the [EOH] valuation was triggered by some of its directors being on the wrong side of a derivatives position.

Moneyweb | Larry Claasen

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Brait’s executive bailout has familiar ring to it.

In 2018, shareholders of Steinhoff Africa Retail were told they would have to pay R500m to bail out executives who faced multimillion-rand liabilities linked to the Steinhoff share price. The announcement that Brait shareholders will be forced to cough up R2bn to bail out another executive incentive scheme, the members of which stood to gain hundreds of millions of rand of profit, may have a familiar and bitter feeling to it.

Business Day | 25 March 2019

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