Bank CEO remuneration soars, but so does staff pay

Over the past decade, fixed remuneration plus short-term incentives for executives at the country’s largest banks has soared. Even excluding the value of long-term incentives such as share options, pay is up anything from 69% to 505%.

The recent Moneyweb analysis of bank executive remuneration highlighted the limitations of using just two arbitrary years as the basis for comparison (shifting the start/end dates would yield dramatically different results).

Bank CEO remuneration Base pay plus short-term incentives
	2009		2018		Change
Absa Group CEO	Maria Ramos1	R8.131m	Maria Ramos	R29.714m	265%
Absa Group CFO	Jacques Schindehütte	R9.177m	Jason Quinn	R17.622m	92%
Capitec2 CEO	Riaan Stassen	R8.947m	Gerrie Fourie	R16.327m	82%
Capitec2 CFO	André du Plessis	R3.918m	André du Plessis	R12.828m	227%
FirstRand3 CEO	Paul Harris	R11.497m	Johan Burger	R37.578m	227%
FirstRand3 CFO	Johan Burger	R7.09m	Harry Kellan	R16.921m	139%
Nedbank CEO	Tom Boardman	R14.551m	Mike Brown	R24.575m	69%
Nedbank CFO	Mike Brown	R7.651m	Raisibe Morathi	R14.325m	87%
Standard Bank CEO	Jacko Maree	R5.953m	Sim Tshabalala	R36.019m	505%
Standard Bank CFO	Simon Ridley4	R8.504m	Arno Daehnke	R23.155m	172%

¹ Appointed March 1

² For Capitec, the years to March 2010 to March 2019 are used

³ For FirstRand, the years to June 2009 and June 2018 are used

⁴ Appointed June 30

But it’s not just executive remuneration that has skyrocketed.

Over the same period, the median remuneration of employees at these five banks has more than kept up. Average remuneration at both Absa Group and FirstRand is up over 200% over the decade, while the increases at Nedbank and Standard Bank are 191% and 183%, respectively. Average remuneration at Capitec is 173% higher.

This means that average pay at each of the banks has roughly tripled over the past 10 years.

The methodology used to calculate this is simple: total staff costs are divided by the total number of employees at each banking group (this includes staff in South Africa as well as the banks’ international operations).

Employee remuneration
	2009		2019		Change (in median)
	Staff costs	Median	Staff costs	Median
FirstRand1	R13.023bn	R304 396	R28.679bn	R619 631	204%
Absa	R10.806bn	R298 921	R24.761bn	R606 055	203%
Nedbank	R7.898bn	R292 118	R17.450bn	R557 918	191%
Standard Bank	R17.848bn	R347 163	R33.773bn	R635 093	183%
Capitec Bank2	R673m	R162 013	R3.871bn	R281 037	173%

¹ For FirstRand, the years to June 2009 and June 2018 are used

² For Capitec, the years to March 2010 to March 2019 are used

This only tells half the story, however. Over the same period (January 2009 to January 2019, used because substantial changes were made to the basket in January 2009), consumer price inflation is up 167%. Although growth in average remuneration at the banks has outpaced inflation, at Capitec it is ever so slightly higher (half a percentage point a year).

At FirstRand and Absa, increases in median remuneration of staff have been nearly four percentage points a year ahead of inflation.

But not only are the increases over the past decade telling, the median salary at the four large ‘full service’ banks is approximately R50 000 a month. It must be noted that these four obviously have corporate and investment banking divisions, which will drag the average upwards. At Capitec, with a far greater proportion of front-line branch staff, the median is R23 000 a month. Included (to some extent) in these calculations are staff long-term incentive schemes, the costs of which are rolled up into the total remuneration numbers. Here, certain staff will benefit disproportionately to others, based on management level, duration of employment, and employment equity status (black staff will generally participate in staff BEE schemes).

Employees	2009	2019	Change
Standard Bank	51 411	53 178	16%
FirstRand	42 783	46 284	3%
Absa	36 150	40 856	8%
Nedbank	27 037	31 277	13%
Capitec Bank	4 154	13 774	232%

Staff numbers at the four full-service banks have grown over the past decade, but at a rate lower than inflation (plus GDP growth). Coupled with this has been the trend – particularly in recent years – for the four banks to cut their physical footprints, both in terms of the number of branches as well as the floor space these take up. This generally means fewer front-line bank service staff.

Across this period, Capitec has aggressively expanded its footprint. At the end of its 2009 financial year, it had around 400 branches. This has more than doubled in the past decade, but the pace of this expansion has been slowing. It added just 14 outlets to a total of 840 in the year to end-February 2019.

* Hilton Tarrant works at YFM. He can still be contacted at [email protected].