Mining CEO Pay Attacked by South African Fund Managers; “Costs are going up double digit, money is not coming in, yet we are seeing a big, big rise in executive pay.”

Mining CEO Pay Attacked by South African Fund Managers

South African fund managers overseeing almost $180 billion in assets said they are stepping up pressure on mining companies to curb executive pay as returns to shareholders dwindle. 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.”Pay for Chief Executive Officers at South African mining companies increased 12-fold in the decade to 2012 while dividends per share dropped 25 percent, according to a presentation at the conference by Michael Schroder, a fund manager at Old Mutual Plc (OML), who helps manage the equivalent of $4.1 billion of assets.

“We are not happy,” said Schroder. “Something clearly has gone wrong here.” He criticized Gold Fields Ltd. (GFI)’s decision to give 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.

Investors are starting to gain traction with companies’ boards on the question of pay, according to Sandy McGregor, a fund manager at Allan Gray Ltd., which manages about $35 billion of assets.

‘Major Issue’

“The system is evolving,” he said in an interview. “I don’t think you’re going to see such huge packages in the future.” The firm has hired a person to work full-time to talk to companies about executive pay, he said.

“It has become a major issue,” McGregor said. “There are a lot of executives in the mining industry who are getting more than they should. We don’t mind people getting very large remuneration packages, but they must have done something to deserve it.”

State-run PIC, which manages public workers’ pensions, rejected pay plans at Anglo American Platinum Ltd., Gold Fields Ltd., AngloGold Ashanti Ltd. (ANG), Sibanye Gold Ltd. (SGL) and Royal Bafokeng Platinum Ltd. (RBP), it said in August. PIC voted at the companies’ annual general meetings in April and May this year.

“My advice to the CEOs is this,” said Old Mutual’s Schroder. “Your personal greed is the biggest obstacle for the turn of this trend.”

To contact the reporter on this story: Kevin Crowley in Johannesburg at

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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