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Absa promises to report back on shareholder concerns about exec remuneration

The logo of South Africa's Absa bank is seen outside an Absa branch in Cape Town, South Africa. Photo: Reuters

The logo of South Africa's Absa bank is seen outside an Absa branch in Cape Town, South Africa. Photo: Reuters

Published Jul 4, 2022

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Absa Group, which has been bedevilled by persistent executive changes, said on Friday that matters raised at a shareholder engagement meeting last week concerning the remuneration of directors would be reported in the group’s next integrated report.

This followed the annual general meeting on June 3, where more than 25 percent of the votes exercised were against the remuneration implementation report. As is typical in these circumstances, a shareholder engagement meeting was held on June 30. Business Report’s request to attend the meeting was turned down as it was not a shareholder.

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In the 2021 financial year, 15.48 percent of the votes went against the remuneration policy, while the figure was 17.01 percent in 2020.

Absa on Friday said shareholders holding about 7 percent of the vote attended the shareholder engagement meeting - a low turnout at these meetings is another South African corporate trend - and those that did and had raised comments relating to the determination of the short-term incentive pool, normalised headline earnings as a metric, and the settlement arrangements with the previous CEO.

Absa paid its former CEO Daniel Mminele R30.47 million in total as a part of a termination agreement, which included almost R500 000 in legal fees.

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According to the banking group's 2021 remuneration report, there had been a "mutual separation agreement" between the board and Mminele to terminate his employment on a "no-fault" basis.

Mminele quit Absa as CEO following clashes with the board on how to implement the bank’s strategy. At the time, Absa chair Wendy Lucas-Bull said Absa's leadership team also didn't see eye-to-eye with Mminele on how to do things. Arrie Rautenbach has since taken over as new CEO.

Although stock exchange analysts generally viewed Rautenbach as a good appointment, there was an outcry from the Black Management Forum and the bank's biggest shareholder, the Public Investment Corporation, because Rautenbach’s appointment carried on a “trend of untransformative appointments.”

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Rautenbach, however, last week moved swiftly, announcing senior executive changes and appointments in line with a “refreshed” transformation strategy.

Rautenbach said in a statement: “We are reconfiguring group exco to create an organisation that is closer to customers, shows superior commercial performance and is fuelled by functional excellence.”

The changes would bring the group’s racial diversity at executive level “close to 50 percent”, while the retail and business-banking division was being split into four parts, which combined with the Corporate and Investment Banking business, would make up the bank’s five new core-focus areas.

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The management reorganisation at Absa comes as the bank expects first-half earnings to rise by more than 20 percent when it reports interim results on August 15. The lender said last week its dividend payout ratio was expected to climb to 50 percent from 30 percent.

The share price increased 0.75 percent to R155.76, but over three years, the price has fallen 9 percent from R171.38. According to the Simply Wall Street online site, SA banks' share prices fell 5 percent in the seven days to July 1, driven by a pull-back of every company in the sector. Over the past 12 months, the industry was up 20 percent, however, and industry annual earnings were expected to increase 16 percent.

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