SA fund managers vs extractives CEOs over (over)pay

Thursday, 31 October, 2013

A quick one to draw your attention to this article on Mineweb (pulled from Bloomberg) on the "fury" of South African fund managers ("overseeing almost $180 billion in assets") as they raise their voices in an attempt to get mining companies to curb executive pay at a time when shareholder returns are dwindling. Not a good market and probably not a surprise move to many. The article:

"The industry “is going through a very, very hard period,” Fidelis Madavo, who helps manage about 1.4 trillion rand ($140 billion) at Public Investment Corp., South Africa’s state pension fund, said at a conference in Johannesburg yesterday. “Costs are going up double digit, money is not coming in, yet we are seeing a big, big rise in executive pay. We have been talking to CEOs individually on this.”"

A few interesting stats follow: pay for CEOs at South African mining companies increased 12-fold in the decade to 2012, while in the same period dividends per share dropped 25%. Michael Schroder, Old Mutual Plc fund manager, picks out Gold Fields Ltd. as a critical example. Gold Fields gave CEO Nick Holland a 39 percent pay rise to 45.3 million rand in 2012, when the shares fell 17 percent (Holland’s pay included salary, bonuses and long-term incentives accumulated in previous years).


NB in the interests of us providing some balance from our own admittedly tight niche, our survey of publicly available information on extractives CSR had the following to say about Gold Fields: 

"Hugely impressive CSR reporting with extensive CSR projects; large list of case studies with much detail, and an impressive collection of videos, clearly archived by country. A News section also aims to keep CSR projects up to date."

So from our POV somebody at Gold  Fields is clearly earning their cheque...

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Back to the article, which concludes that this has become a major issue and one on which investors are likely to have a pretty significant effect in the near to mid term future.  While we also learnt today that Africa’s set to become a tightly integrated growth pole, news from SA suggests that on the other  hand huge packages may become a thing of the past.