Johannesburg - Executive pay levels for mining bosses came under the spotlight yesterday, with industry insiders and fund managers strongly calling for a revision in light of the sector’s performance in recent times.
Speaking at the Investing in Resources and Mining in Africa Joburg Indaba, former AngloGold Ashanti chief executive Bobby Godsell emphasised that the mining sector had to revise executives’ pay and that remuneration must be linked to performance. “I am suggesting a rethink of executive pay so that mining companies can stand in front of shareholders and defend the pay levels of executives.”
Fund managers overseeing almost $180 billion (R1.7 trillion) in assets said they were stepping up pressure on mining companies to curb executive pay as returns to shareholders dwindled.
“Costs are going up by double-digit [percentages], money is not coming in, yet we are seeing a big, big rise in executive pay,” Fidelis Madavo, who helps manage about R1.4 trillion at the Public Investment Corporation (PIC), told the conference in Johannesburg. “We have been talking to chief executives individually on this.”
Pay for chief executives at South African mining companies increased 12-fold in the decade to 2012 while dividends a share dropped 25 percent, according to a presentation at the conference by Michael Schroder, a portfolio manager at Old Mutual. “We are not happy. Something clearly has gone wrong here.”
He criticised Gold Fields’ decision to give chief executive Nick Holland a 39 percent pay rise to R45.3 million in 2012, when the shares fell 17 percent. Holland’s pay included salary, bonuses and long-term incentives accumulated in previous years.
Holland’s R9.3m salary is 144 times higher than the annual wage, excluding bonuses and benefits, paid to entry-level underground workers at Gold Fields, who get R5 400 a month.
Spokesman Sven Lunsche said management had taken a pay freeze for the 2012/13 financial year, but declined to comment further.
Chief executives of companies on the JSE are paid an average 54 times more than the lowest-earning worker at their companies, according to a study published this year by PwC. The ratio is 20 times in China, 12 times in Switzerland and 204 times in the US, the study shows.
Investors are starting to be heard by mining companies’ boards on the question of pay, according to Sandy McGregor, a fund manager at Allan Gray.
“The system is evolving. I don’t think you’re going to see such huge packages in the future,” McGregor said.
The firm had hired a person to work full-time to talk to companies about executive pay, he said.
“It has become a major issue,” McGregor said. “There are a lot of executives in the mining industry who are getting more than they should. We don’t mind people getting large remuneration packages, but they must have done something to deserve it.”
The state-run PIC, which manages public workers’ pensions, had rejected proposed pay plans at Anglo American Platinum, Gold Fields, AngloGold Ashanti, Sibanye Gold and Royal Bafokeng Platinum, it said in August.
The PIC voted at the companies’ annual general meetings in April and May. The industry “is going through a very, very hard period”, Madavo said.
The Chamber of Mines, which represents South African mining companies, did not immediately respond to a request for comment.
Old Mutual’s Schroder said: “My advice to the chief executives is this: your personal greed is the biggest obstacle for the turn of this trend.” – Additional reporting by Dineo Faku