Bank bonuses cut in South Africa

The reporting season is over for South Africa's big banks and two main trends have emerged: bonuses have generally been cut, even if salaries have increased to compensate; and CEOs are taking the pain by forfeiting their bonus.

Both trends follow the lead from Europe, despite the fact that the situation is very different in South Africa. The banking sector has a track record of moderation and responsibility with very rare lapses into excess, so that banker-bashing has not become a popular sport in South Africa as it has in the UK.

But, despite the different circumstances, the message clearly has filtered down to South Africa that poor performance must not be rewarded.

At Standard Bank, the country's biggest, Ceo Jacko Maree and its two deputies Sim Tshabalala and Ben Kruger will go without a bonus this year and their salaries will not be increased for the second year in a row, spokesman Erik Larsen confirmed. Standard Bank was much criticised last year for awarding a R7.5m 'golden goodbye' to outgoing chairman Derek Cooper and soon after announcing that 2,000 people would be retrenched.

Nedbank announced that its executives forfeited their share options for failing to meet revenue targets, from Ceo Mike Brown to the Chief operating officer to the company secretary down to board members. Fair's fair, Mr Brown said: "We agreed to the performance targets and since then earnings and return on equity declined."

Absa revealed that in 2010 it spent R1.1bn on bonuses, an increase of 71% over the year before, but this was due to deferrals designed to make executives work with a long-term strategy and not for short-term gain.

"If you get a R100 bonus R65 are held back and that's paid in tranches and it has performance conditions attached to it," says David Hodnett, Absa Chief financial officer. "So you are really saying to your senior staff you have to make this business sustainable and it's not only about making profits for one year. Regulators are asking for deferrals around the whole world and we would be very comfortable that our deferral ratios are well within what any international regulator is talking about."

This year, at executive committee level, 65% of bonuses will again be deferred over three years.

Bonus deferrals are not the only way SA bankers are falling into line with international trends: another is widespread dissatisfaction among bankers and increased mobility. "South Africa has just come out of a recession so bonuses are down, but people had strong expectations that have not been met so there is a lot more movement and people wanting to change jobs," says Mike Atter, associate director of recruitment consultancy Robert Walters SA in Johannesburg. "Spring is the time when people choose to jump and the market becomes a game of musical chairs. We are very busy."