Jun 05

Standard Bank’s Remuneration Policy Faces Scrutiny Despite Increased Shareholder Support

Standard Bank experienced a notable shift in shareholder support regarding its remuneration policy at the 2023 Annual General Meeting (AGM). This development marks a significant change following a period of declining approval from 2019 to 2022.

At the 2023 AGM, shareholders backed the bank’s remuneration resolutions. The non-binding advisory resolution on Standard Bank’s remuneration policy received a substantial 92.44% support, a sharp increase from 75.50% in 2022. Similarly, the implementation report garnered 92.19% approval, up from 75.91% the previous year. This turnaround comes after a significant 24.5% of shareholders voted against the policy and 24.1% against the implementation report in 2022.

Two major adjustments were made to the remuneration policy to address shareholder concerns:

  1. Performance Thresholds in the Performance Reward Plan (PRP): For the latest awards in March 2024, the headline earnings growth metric thresholds will be assessed against external measures, and the return on equity (ROE) thresholds have been strengthened.
  2. Enhanced Clawback Policy: The clawback provisions have been extended to include all executives, not just material risk takers. This measure aims to maintain leadership accountability and ensure long-term legitimacy and investor trust.

While these changes are welcomed, we have concerns.

We would like to see a greater level of independence in the Remuneration Committee. We have expressed our concern that the chairman of this committee Ms Kennealy and Ms Matyumza sit on the same boards and committees as this casts a doubt on their ability to act independently. Mr Maree is the former CEO, he did serve a cooling off period which is commendable, but his association with the company is such that his independence is questioned.

The report states that executive remuneration is benchmarked against local and international banks, although we seek more clarity on the benchmarking process.

The introduction of caps on STI rewards was welcomed, although the high caps of 300% for the CEO and 275% for the CFO are excessive. Setting such high caps after shareholders requested that caps be set may lead some readers to conclude that Remco is going through the motions of setting caps rather than recognising the real concern of shareholders.

We also consider a three-year time horizon for LTIs as insufficient.

In 2023, the top seven executive directors of Standard Bank Group earned over R400 million (R411.6 million), with more than half (R207 million) coming from their fixed pay and short-term incentives. Group CEO Sim Tshabalala earned over R83 million, with R35.7 million from fixed pay and short-term incentives and nearly R50 million from long-term PRP shares, including dividends. His target performance pay would have been R61 million, with a maximum potential of R105 million.

The wage gap remains a critical concern due to South Africa’s high inequality levels, which threaten social stability. Shareholders urge greater attention to environmental factors and a more transparent and accountable remuneration process.

Ongoing dialogue with shareholders will be crucial to address remaining concerns and ensure that remuneration practices support long-term growth and stakeholder trust.

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