South African fund managers overseeing almost US$180 billion in assets say they are stepping up pressure on mining companies in South Africa to curb executive pay as returns to shareholders dwindle.
The industry “is going through a very, very hard period,” says Fidelis Madavo, who helps manage about R1.4 trillion (US$140 billion) at Public Investment Corporation, South Africa’s state pension fund. “Costs are going up double digit, money is not coming in, yet we are seeing a big, big rise in executive pay. We have been talking to CEOs individually on this,” quotes Bloomberg News.
Pay for CEO’s at South African mining companies increased 12-fold in the decade to 2012, while dividends per share dropped 25%, according to a presentation here by Michael Schroder, a fund manager at Old Mutual plc, who helps manage the equivalent of US$4.1 billion of assets.
“We are not happy,” said Schroder. “Something clearly has gone wrong here.” He criticised Gold Fields Limited’s decision to give CEO Nick Holland a 39% pay rise to R45.3 million in 2012, when the shares fell 17%. Holland’s pay included salary, bonuses and long-term incentives accumulated in previous years.
Investors are starting to gain traction with companies’ boards on the question of pay, according to Sandy McGregor, a fund manager at Allan Gray Limited, which manages about US$35 billion of assets
“The system is evolving,” he said in an interview. “I don’t think you’re going to see such huge packages in the future.” The firm has hired a person to work full-time to talk to companies about executive pay, he said.
“It has become a major issue,” McGregor continued. “There are a lot of executives in the mining industry who are getting more than they should. We don’t mind people getting very large remuneration packages, but they must have done something to deserve them.”
State-run PIC, which manages public workers’ pensions, rejected pay plans at Anglo American Platinum Limited, Gold Fields Limited AngloGold Ashanti Limited, Sibanye Gold Limited and Royal Bafokeng Platinum Limited, it said in August.
“My advice to the CEOs is this,” said Old Mutual’s Schroder. “Your personal greed is the biggest obstacle for the turn of this trend.”
Source: Bloomberg News. For more information, click here.