ON the face of it, the bonus pool arrangement for staff at asset manager Coronation appears to be a good thing.
The
plan dates back to 2003, shortly before the investment company listed.
Coronation stipulated that it would set aside 30% of its pre-tax profits
every year for staff, to be paid into a "bonus pool".
It describes this system as a "cornerstone" of its success, as it "assists greatly in attracting and retaining world-class talent and it contributes to our owner-managed culture".
It also argues that as most of its key competitors are unlisted, it does not disclose its bonus portion because the information is sensitive.
In a country in which staff often get the short end of the stick while shareholders end up in the pound seats, you can see why this would be popular — at least within the company.
It’s a policy that, especially in recent years, has made some people enormously rich. In the past five years, Coronation’s share price has soared 258%, bolstered by good investment performance and major inflows.
But attitudes to bonuses and executive pay have evolved, so Coronation’s defensiveness appears to be out of step with the zeitgeist.
An Institute of Directors in Southern Africa register shows Coronation does not comply with the principle dealing with shareholder approval of remuneration policy.
At its annual general meeting last month, shareholder activist Theo Botha was stymied when he asked to see the company’s remuneration policy.
This is important because, unlike most other JSE-listed companies, Coronation chooses not to put its remuneration policy to a shareholder vote.
By way of explanation, Coronation argues in its annual report that its policy is "contractually entrenched", was included in the 2003 pre-listing statement and has been "communicated" to all stakeholders.
A spokesman told Business Day this past week that because the remuneration committee had the authority to approve remuneration, shareholder approval was not required.
This is a poor argument, considering Coronation’s position of influence in the investment landscape.
The fact that Mr Botha had to go to the lengths of lodging a Promotion of Access to Information request to demand sight of Coronation’s remuneration policy seems particularly poor.
It also appears unnecessary.
Maybe Coronation is sensitive, given the heated arguments over inequality and the strident criticism of high executive remuneration.
Coronation made R2.4bn in pretax profit in 2014, so 30% of that amounts to R720m — illustrating just how fat the margins are in the fund management business.
But still, as a crucial cog in SA’s investment machinery, Coronation should be willing to engage in these debates rather than hide behind a 13-year-old pre-listing statement. It should welcome discussion about whether this sort of "bonus system" is appropriate in 2016. There won’t be easy answers.
Given that SA is at a particularly precarious period — with growth on the skids and unemployment on the rise — it does appear to show a deep lack of emotional intelligence to be shunting so much money into a "bonus pool" for just a few hundred staff.
There are probably other options it could consider, especially since it gets its profit directly from society, by managing people’s pension funds and savings.
Hiding behind the letter of a policy designed in another era instead of showing a willingness to even discuss it with shareholders does Coronation no favours. Many companies indulge in excessive pay and bonus schemes — Coronation just happens to have made the news in recent weeks.
The sooner the debate is taken up by those who can make a difference — such as fund managers — the better SA will be.
It describes this system as a "cornerstone" of its success, as it "assists greatly in attracting and retaining world-class talent and it contributes to our owner-managed culture".
It also argues that as most of its key competitors are unlisted, it does not disclose its bonus portion because the information is sensitive.
In a country in which staff often get the short end of the stick while shareholders end up in the pound seats, you can see why this would be popular — at least within the company.
It’s a policy that, especially in recent years, has made some people enormously rich. In the past five years, Coronation’s share price has soared 258%, bolstered by good investment performance and major inflows.
But attitudes to bonuses and executive pay have evolved, so Coronation’s defensiveness appears to be out of step with the zeitgeist.
An Institute of Directors in Southern Africa register shows Coronation does not comply with the principle dealing with shareholder approval of remuneration policy.
At its annual general meeting last month, shareholder activist Theo Botha was stymied when he asked to see the company’s remuneration policy.
This is important because, unlike most other JSE-listed companies, Coronation chooses not to put its remuneration policy to a shareholder vote.
By way of explanation, Coronation argues in its annual report that its policy is "contractually entrenched", was included in the 2003 pre-listing statement and has been "communicated" to all stakeholders.
A spokesman told Business Day this past week that because the remuneration committee had the authority to approve remuneration, shareholder approval was not required.
This is a poor argument, considering Coronation’s position of influence in the investment landscape.
The fact that Mr Botha had to go to the lengths of lodging a Promotion of Access to Information request to demand sight of Coronation’s remuneration policy seems particularly poor.
It also appears unnecessary.
Maybe Coronation is sensitive, given the heated arguments over inequality and the strident criticism of high executive remuneration.
Coronation made R2.4bn in pretax profit in 2014, so 30% of that amounts to R720m — illustrating just how fat the margins are in the fund management business.
But still, as a crucial cog in SA’s investment machinery, Coronation should be willing to engage in these debates rather than hide behind a 13-year-old pre-listing statement. It should welcome discussion about whether this sort of "bonus system" is appropriate in 2016. There won’t be easy answers.
Given that SA is at a particularly precarious period — with growth on the skids and unemployment on the rise — it does appear to show a deep lack of emotional intelligence to be shunting so much money into a "bonus pool" for just a few hundred staff.
There are probably other options it could consider, especially since it gets its profit directly from society, by managing people’s pension funds and savings.
Hiding behind the letter of a policy designed in another era instead of showing a willingness to even discuss it with shareholders does Coronation no favours. Many companies indulge in excessive pay and bonus schemes — Coronation just happens to have made the news in recent weeks.
The sooner the debate is taken up by those who can make a difference — such as fund managers — the better SA will be.
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