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JEREMY MAGGS: African Bank is under pressure after reportedly awarding its chief executive officer (Kennedy Bungane) a 64% pay increase in the same year the bank reported a major profit slump. The decision, I think, has sparked broader questions about executive remuneration and accountability.
Someone who watches this trend line very closely is Tracey Davies, executive director at Just Share. Tracey, maybe just the opening point, how do you interpret the timing of a 64% pay increase alongside a significant profit slump? What’s your reading?
TRACEY DAVIES: Hi Jeremy. It is becoming increasingly difficult to make any sense of these payouts, whether from a timing point of view or otherwise.
As you would have seen from the article that discusses this on News24, the African Bank CEO says that a lot of the bonuses involved here are actually due to previous periods, and so you can’t compare his current executive pay with the current profitability or otherwise of the bank.
Listen/read: Executive pay rebounds strongly in 2025 survey
But I think we get caught up in the particular numbers or the particular timing of one executive, but we really need to zoom out and look at the whole picture. The whole picture is that these numbers are just obscene by any measure, regardless of what they are or are not linked to, which is very unclear.
We have this roundabout conversation in South Africa about executive pay, but we never make any progress.
African Bank has 6.3 million customers and a R59 million CEO payout. Standard Bank has 19 million customers, CEO remuneration R89 million. Discovery Bank has 1.2 million customers, CEO remuneration R61 million. There is just no rational connection here between any metric that will allow us to properly analyse these numbers.
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JEREMY MAGGS: On the broader corporate canvas, whether it’s banking or other sectors, do you think that organisations are becoming increasingly disconnected from the economic reality of their customers and their workforce?
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TRACEY DAVIES: One hundred percent, absolutely no question about it. The CEO remuneration world is an entirely separate, siloed world that exists outside reality.
If you look at the listed companies in South Africa, every year at their AGMs they have to put a say-on-pay vote for their shareholders to vote on, where shareholders either approve or don’t approve the remuneration policies and implementation reports.
The numbers of shareholders voting against those policies and implementation reports has dramatically increased over the years, but it doesn’t change anything.
Every year we see more and more, bigger and bigger numbers.
There’s just no connection whatsoever between the economic reality of the country and of the workers, and of what these people are earning.
JEREMY MAGGS: How do you respond to the argument that talent retention requires higher pay? It’s difficult, is it not, to test the validity of any claim in a small, highly competitive market where unique skills are needed?
TRACEY DAVIES: Yeah, that is a catch-all excuse for all sorts of crazy remuneration practices. Of course you need to retain talent. But why does Fani Titi, who’s the CEO of Investec, need to be retained with R100 million, but Jason Quinn at Nedbank only needs to be retained with R27 million? How do you explain that R70 million differential in terms of talent retention? There is nothing to suggest that there are any, as I keep saying, that there’s any rational basis for these numbers.
Read: Investec eyes business banking for growth [May 2024]
It’s just staggering. We talk about these annually. This is R61 million this year and so on. But most of these people have been earning these figures for five, 10, 15 years.
They are worth billions of rands and are they really contributing to the economy?
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Are they really the most important people in our society and the only way that we can retain them, and the only way that we can get this talent at the top of these entities is by paying them these extraordinary numbers?
There are plenty of people who do extraordinary work in this country for tiny amounts of pay. So it’s an excuse. The talent retention thing is an excuse.
JEREMY MAGGS: It’s possible, of course, that boards of directors see value creation differently from how analysts and the public measure it, though.
TRACEY DAVIES: It is but boards of directors are supposed to look at these things from a society-wide perspective. Listed companies are entities in our society. They don’t operate separately. They’re not special beings. They have an impact on society. They interact with society.
The role of a board of directors, the role of a remuneration committee, is to look not just at the value that a particular individual is creating for a company or for shareholders, but that in the context of our broader society, these numbers also bear – if you look at all the studies that have been done on executive remuneration – there’s no correlation between company performance and executive pay.
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Shares go up and down for all sorts of reasons that have nothing to do with the CEO. But they take all the upside when the share price increases and none of the downside when the share price decreases. There’s a whole world of remuneration consultants.
Remember that the boards of directors who are setting these figures and these numbers are also themselves hugely and highly remunerated.
It’s not in anyone’s interest to reduce these numbers. So unless there is a binding shareholder vote on pay or some kind of public revolt against these numbers, this is a conversation you and I will be having again this time next year.
JEREMY MAGGS: So what’s the solution? Is it stricter regulation of executive pay, if at all that’s possible?
TRACEY DAVIES: Well, of course the industry will fight tooth and nail against that. The chances of that ever happening are very slim, especially because of the revolving door between government and corporate boards of directors, where you’ll find many, many, many ex-government players now earning R5 million, R10 million, R15 million sitting on the boards of listed companies.
So it’s not in any of those elite interests to regulate executive pay.
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But recently there were amendments to the Companies Act that will make shareholder votes on executive pay binding. They should be coming into effect any moment.
Listen/read: Clarity on latest amendments to the Companies Act
That’s the only way that we’re going to see any change, when you actually give the people who own these companies – shareholders – a proper say in whether these kinds of numbers are acceptable.
JEREMY MAGGS: But it would seem to me that there’s a lot of shareholder apathy in that respect.
TRACEY DAVIES: Well, there’s actually a lot of shareholder pushback against executive pay, as I was saying, in relation to the say-on-pay votes. But those votes are non-binding.
So it doesn’t matter at the moment how many shareholders object to the remuneration, companies continue to do what they want. You’re right, there is shareholder apathy, because if there really was an appetite to do something about this, shareholders could vote off the chairs of remuneration committees at these companies. There are definitely stronger steps that could be taken.
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But again, remember that the shareholders — the asset managers who hold shares in these companies – many of them are themselves listed companies with CEOs and other executives earning tens of millions of rands a year. It is a rigged system, Jeremy. There is absolutely no question about it.
JEREMY MAGGS: Tracey Davies, thank you very much indeed, executive director at Just Share.
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