Share price versus CEO salary – Capitec beats Absa, Standard Bank, and Nedbank

Capitec is the only South African bank whose share price has increased more than the salary of its chief executive over the last decade.

An analysis by Daily Investor revealed that the Capitec CEO’s salary increased by 475% over the last decade – from R10.8 million to R62 million.

Over the same period, the Capitec share price increased by 698%. This means that shareholders increased their wealth faster than the CEO’s salary.

Absa’s CEO salary increase over the last ten years also closely tracked the company’s share price performance.

In 2013, former Absa chief executive Maria Ramos earned R29 million. In 2023, CEO Arrie Rautenbach received R40 million.

This 40% CEO salary increase is nearly the same as the 36% increase in the Absa share price over the last decade.

Standard Bank CEO Sim Tshabalala’s salary increased by 190% over the last decade – from R29 million to R83 million.

In comparison, the company’s share price increased by only 65%. That means the bank’s CEO salary increased three times faster than the share price.

Nedbank was the worst performer. Mike Brown’s salary increased from R33 million to R93 million between 2013 and 2023.

This 184% CEO salary increase was multiple times higher than the 20% Nedbank share price increase over the same period.

Daily Investor calculated the market cap growth for a 100% salary growth to compare the CEO salary increase with the share price growth.

It showed that Capitec achieved 147% share price growth for a 100% growth in chief executive salary.

Absa achieved 91% share price growth for 100% salary growth, followed by Standard Bank with 34% and Nedbank with 11%.

The table below shows how the four major South African banks compare.

Company	CEO Salary Increase	Share Price Increase	Comparative Performance
Capitec	475%	698%	147%
Absa	40%	36%	91%
Standard Bank	190%	65%	34%
Nedbank	184%	20%	11%

Executive pay in South Africa

Executive compensation has been a hot topic for many years, with workers, shareholders, and boards grappling with appropriate pay levels.

Competitive executive salaries are important to attract top talent and keep highly skilled leaders in the country.

Many South African executives have already left the country for higher pay packages or safer living conditions.

It has become such a challenge that many JSE-listed companies are forced to appoint older executives rather than look for new blood.

With the brain drain and flight of skills out of South Africa, there is a risk for companies to tamper with executive pay.

However, there is another side to this coin. Many shareholders feel that executive pay does not align with their interests.

Critics argue that company boards and remuneration committees are part of the same system that looks after their own.

Instead of having performance-based packages which reward excellence, executives enjoy high remuneration even if a company performs poorly.

Shareholders often cannot stop the remuneration committee’s policies because of a lack of voting power.

There are even calls for regulators and the Johannesburg Stock Exchange to proactively address shareholder opposition to executive remuneration.

Another concern is that executive compensation is out of sync with the interests of ordinary workers.

In July, President Cyril Ramaphosa signed amendments to the country’s Companies Act, requiring firms to disclose the pay gap between their highest- and lowest-paid workers.

All public and state-owned companies must now report all employees’ average and median total remuneration.

They must also disclose the earnings gap between the top 5% highest paid employees’ total pay and the bottom 5% lowest paid workers.

Cliffe Dekker Hofmeyr’s Vivien Chaplin and Haafizah Khota warned that the new legislation is not without risks.

For instance, disclosing the pay gap may inadvertently encourage executives to seek opportunities in foreign jurisdictions with more favourable remuneration policies.

Companies aiming to address the pay gap between their highest and lowest-paid employees may seek to reduce the gap through workforce reduction or outsourcing.

Lower-level employees, who are already struggling with comparatively low wages, may face job losses or reduced opportunities.