ABSA CEO Maria Ramos and members of her executive will not receive bonuses this year as they take responsibility for the bank’s disappointing performance.
Increasingly, the incentives of South African bank executives are being linked to performance.
Last year, Investec announced that CEO Stephen Koseff, MD Bernard Kantor and group finance director Glynn Burger would forfeit their annual cash bonus after a disappointing performance.
In 2011 Standard Bank Group CEO Jacko Maree and his deputy Sim Tshabalala lost out on their bonuses after the bank delivered weaker results in the full year to end December.
In the year to end December 2012, Absa’s bonus payments declined 23% to R985m from more than R1bn in 2011 — which could mean that more executives were not paid bonuses or took lower incentives than in 2011.
Absa on Tuesday reported a 9% decline in headline earnings per share in the full year to end December 2012.
The bank was hit by impairments in its home loan and commercial property finance book.
Asked why she was taking a knock in her bonus for impairments as a result of home loan contracts signed between 2006 and 2008, Ms Ramos said: “At the end of the day it does not really matter when it happened.
“What matters is we have to do the right thing. Last year’s results are what they are. I am not happy with them and the shareholders are not happy with them.”
Ms Ramos refused to say whether other Absa executives would forgo their bonuses.
“The fact of the matter is, impairments have impacted in a big way … everybody has taken their fair share,” she said.
Ms Ramos said she took comfort in the fact that her leadership team included people who “held themselves accountable”. Last year, Ms Ramos deferred her R14m incentive bonus for 2011, electing to receive it in three equal portions up to 2015. She last received a cash bonus — of R2.2m — in 2010.
“I think that it’s good that when they (executives) don’t perform, they don’t get bonuses. It sends a message,” corporate governance expert Tom Wixley said on Tuesday.
Shareholder activist Theo Botha said this behaviour needed to move beyond banking and into other industries.
“It’s a good thing. The (bank’s) performance is poor. There is no way she should be getting a bonus. But it should spill down to other executives ... unless some division did well. It should not be limited to the CEO,” he said.
“The problem is that certain companies are paying directors bonuses when there is no growth,” Mr Botha added.
Earlier this month Antony Jenkins, CEO of Absa’s parent company Barclays, said he would forego his annual bonus as the group had had a difficult year.
Barclays reported on Tuesday that the bonus pool for all employees across the group had fallen by 14% to £1.85bn.
The UK bank’s ratio of compensation to net income decreased from 42% to 38% for the group as a whole, and was 39% in the investment bank, down from 47%.
With Financial Times