Nedbank's 'golden parachute' is the exception rather than the norm
By South African standards, Tom Boardman got a spectacularly good 'golden parachute'. The chief executive of Nedbank, who stepped down in March, saw his remuneration increase by 79% to over 43 million rand last year. He received 25.5m rand in Nedbank shares, almost a three-fold increase on the previous year, while his bonus, which included an undisclosed severance payment, rose 43% to 9.5m rand.
Boardman's remuneration package dwarfs those of rival banks' CEOs.
Jacko Maree, Standard Bank's long-serving Ceo, was paid a total of 18.2m rand, with a deferred bonus and share incentives worth 12.2m rand. Maria Ramos at Absa received 13.5m rand, less than her predecessor the previous year, and chose to pass on the 2.92m rand bonus she was entitled to this year. FirstRand Ceo Paul Harris, who has also now retired, was paid 11.4m rand.
"Nedbank does not have a reputation for overpaying, quite the opposite," says Veronique Parkin, partner and head of financial services at Heidrick & Struggles in Johannesburg, which specialises in senior and executive-level recruiting. "It is regarded as a solid, consistent player. In general, caution and moderation tend to be the norm in South African banks, although of course investment bankers do get much higher bonuses."
According to another recruiting expert who wants to remain anonymous, "Absa and Rand Merchant Bank are much better payers than Nedbank."
Boardman's generous send-off is therefore an exception rather than the norm and is unlikely to cause much of a ripple. Executive remuneration is under increased scrutiny in South Africa as everywhere else, but the issue is less sensitive. "There is nowhere near the emotional response in South Africa because the banks have not needed state help and have not paid excessive bonuses in the past," says Chris Blair, Ceo of 21st Century Business and Pay Solutions, a remuneration consultancy in Johannesburg.
However, things have changed and banks' new remuneration packages do follow international trends, with an increasing proportion paid in stock and the payment of shares being deferred and linked to performance.
But in South Africa there is more of a focus on executive retention. "The skills shortage in the financial services sector is such that skills retention is more of an issue," says Parkin. "Banks have to strike a balance between being realistic and needing to retain key people." In Boardman's case, the two issues of performance and retention are important. First, he turned around the loss-making bank he took over in 2003. Its share price has doubled this year. "He has done a brilliant job, by all accounts," says Parkin. Secondly, his shares package is a retention strategy designed to ensure he does not join a rival bank.
