Huge Executive Remuneration Worries Bank Shareholders.
At a time that the ravages of the COVID pandemic has compelled cost-cutting measures in several sectors, 10 banks have jerked up executive compensation of their directors to N5.75 billion rising 5.2 per cent in the 2020 financial year and creating worries among shareholders.
The year 2020 was harrowing for many businesses during which they struggled and employed several measures including lay-offs to stay afloat.
In the year, however, 10 banks increased compensation for their directors by 5.2 per cent over the N5.46billion spent in 2019.
A government institution, the Financial Reporting Council of Nigeria (FRC) also toed the same line, approving and effecting jumbo pay for its staff at a time that they were working from home and revenue was taking a hit.
Regrettably, the increase in executives’ compensation by the banks came at a time the sector and the country’s economy was battling a liquidity crunch owing to the unwholesome operating environment which knocked the life out of many firms, while others walked a tight rope to survive.
InsideBusinessNG correspondent gathered that nearly 10 banks, with Zenith bank compensation for its 15 directors rising by nearly 10 per cent to N1.25billion in 2020 from N1.14billion in 2019. United Bank for Africa (UBA) and Union Bank of Nigeria reported a decline in compensation for executives in alignment with the realities of the time.
The management of the banks defended their actions, saying the compensation is rooted in the provisions of the code of corporate governance issued by regulators and accepted by shareholders. Investors however kicked against what they described as unnecessary huge remuneration.
The breakdown revealed that Fidelity Bank’s plc executive compensation rose significantly to N437million in 2020, a 66.8 per cent increase from N262million reported in 2019, while that of Guaranty Trust Bank Plc inched up by 1.05 per cent to N921.36million in 2020 from N911.8million in 2019.
A further check by InsideBusiness revealed that Fidelity Bank in 2020 had seven directors from five in 2019, while GTBank with 14 executive directors for the second consecutive years.
However, Wema bank Plc reported N297.8million compensation for its executive for the second year as UBA’s compensation for its directors dropped by 14.3 per cent in 2020 to N698million from N814million reported in 2019.
Others are Union Bank of Nigeria with a nearly a nine per cent drop to N547million compensation for its executive from N598million in 2019, as Stanbic IBTC Holdings reported N752million in 2020 from N661million in 2019, an increase of 14 per cent.
Sterling Bank Plc last year reported N156million in 2020 from N136 million reported in 2019, while FCMB Holdings’ compensation for directors rose by 7.8 per cent to N565.8million in 2020 from N524.75million in 2019.
In addition, FBN Holdings reported a nearly two per cent increase in compensation executive to N122million in 2020 from N120million reported in 2019.
A shareholder and analyst, Ade Akinpelu, said the amount of compensation paid to bank directors still on increase despite repeated clamour by investors at every Annual General Meeting (AGM) that the package should be reviewed downward.
A former bank manager, who pleaded anonymously, affected by Covid-19-induced retrenchment, said many of the banks had streamlined workforce and converted some of their staff to casual workers.
According to him, “Ironically, while the hierarchy of the banks is cutting down on staff salary and even replacing experienced graduate members of staff with inexperienced, much younger holders of Ordinary National Diploma – all in a bid to reduce the overhead, the directors’ and chairmen’s emoluments has remained untouched.
“In asking some of the old hands to go, the management often blamed the action on the harsh economic environment, saying that the junior staff with enough stamina could do the job of the senior ones, even better. As a result, most senior staff members across the banking industry now go to work in fear.”
An analyst, Adewale Moses said, “Considering the economic condition of Nigeria, every organisation should cut down on excess packages to reflect the present economic realities. The executive directors should not be excluded from this belt-tightening.
“The banks’ Executives’ compensations are really on the high side when you compare it to other countries. The executive directors of banks are given all kinds of allowances at the expense of depositors and shareholders. We do react to this issue when we attend AGMs.
“In some cases, we refused to approve their remuneration and asked them to go back and review it downwards.”
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