High emoluments not solution to insider dealings – Experts
- Shareholders disagree on jumbo pay
In spite of speculations that many of Nigeria’s commercial banks are battling with liquidity stress, 99 directors of eight top banks earned N5.207billion in 2017 alone, investigations have revealed.
An analysis of the banks’ financial statements for 2017 showed that the total amount of money paid to the 99 directors increased by about 23 per cent, up from N4.228billion in 2016 to N5.207 billion last year.
The eight banks include Union Bank Plc, Diamond Bank Plc, FCMB Plc, FBN Holding, Fidelity Bank Plc, GTBank Plc, Zenith Bank Plc, and Sterling Bank Plc.
Some of them insider loans that are not performing and the shareholders bear the burden. Paying high salaries and allowances is not the solution to insider dealings
Although the managements of the banks said the salaries and wages paid to their directors complied with the provisions of the code of corporate governance, issued by regulators and accepted by shareholders, the investors kicked against what they described as unnecessary huge remuneration.
The investors reacted at their Annual General Meetings last week, and alleged that aside from high remuneration and other allowances being drawn by the bank directors, there were several other payments to their domestic staff, which were not captured in the books.
BOARD EXPENSES
FBN Holding led the eight banks with N971million paid to its 11 directors, including the Chairman and Chief Executive Officer in 2017, up from N442 million in 2016.
Fidelity Bank followed with N468million emoluments paid to its 14 directors in 2017, against N464million, which the directors got in 2016. Diamond Bank and Zenith Banks were third and fourth, respectively, with N332million and N181.5million paid to 16 and 10 directors in that order.
Others are: Sterling Bank, which paid six directors N133 million in 2017, down from N136 million in 2016; and GTBank, which also paid its 15 directors N1.578billion in 2017, from N1.382billion in 2016. Union Bank Plc paid 15 directors N1.273billion in 2017, up from N1.204billion in 2016.
BANK CHAIRMEN’S EMOLUMENTS
An analysis of the amount paid to chairmen of the eight banks showed that the figures increased by about six per cent from N222.5million in 2016 to N235.5million in 2017.
The Chairman of FBN Holding received the highest pay, with N64million in 2017, representing a 33.3 per cent increase from the N48 million he was said to have earned in 2016. Zenith Bank’s Chairman earned the second highest – N52 million, which was also the amount earned in 2016.
The Chairmen of GTBank, Union Bank and Diamond Bank, followed with N35million, N30million, and N29million respectively, paid in 2017. They earned the same in the 2016 financial year.
Others are: Fidelity Bank, which paid N15 million in 2017, as against N18million in 2016. FCMB paid N10million in 2017, as against N10.5 million in 2016.
However, The Point’s investigation further revealed that despite the Central Bank of Nigeria’s restrictions on bank’s dividend payout, some banks’ directors collected about N30.217 billion dividends in 2017, representing a 38.8 per cent up-shoot in their dividend income, as against N21.771 billion in 2016.
In doing this, the apex regulator said it intended to discourage high dividend payout by banks, on the heels of worsening non-performing loans, which were eroding banks’ capital adequacy. The policy would then force the banks to plough back their profits to beef up their capital base.
THIS IS WRONG, SAY ANALYSTS
A financial analyst, Mr. Emmanuel Akinjide, said the amount of salaries and wages paid to bank directors was still on the increase despite repeated clamour, by investors at every AGM that the package should be reviewed.
A former bank manager, Mr. Godwin Badejo, who was affected by the banking sector’s consolidation, said many of the banks had streamlined workforce and converted some of their staff to casual workers.
He said, “But ironically, while the hierarchy of the banks are 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’ remuneration 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.”
SHAREHOLDERS DIFFER
Meanwhile, the issue has polarised the ranks of the banks’ shareholders, findings have shown.
For instance, the National Chairman, Progressive Shareholders Association, Mr. Boniface Okezie, said both the apex regulator and the management of the banks, had to find a way to curtail high remuneration of directors in the banking industry, adding that despite the high remuneration every financial year, insiders’ dealing persisted.
“If you go to some banks’ Managing Directors’ respective homes, you will see the fleet of cars as if they are into car business. Their flamboyant lifestyle is worrisome. I am not comfortable with it. Some of them take insider loans that are not performing and the shareholders bear the burden. Paying high salaries and allowances is not the solution to insider dealings,” he stressed.
Chairman, Proactive Shareholders Association of Nigeria, Mr. Taiwo Oderinde, said, “Directors of companies are trustees that we have given the mandate to take decisions on behalf of the company. This means that shareholders have given their approval. One of the reasons we have allowed them to take good remuneration is for them not to steal our money.”
According to Oderinde, the packages for executive directors are not too much, given the volume of work they do and the income they make for the institutions.
“My position on this issue is that it should be looked at with respect to the contribution they bring to the organisation,” he said.
A professor of Financial Economics, Leo Ukpong, 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 on this issue when we attend Annual General Meetings. In some cases, we refused to approve their remuneration and asked them to go back and review it downwards.”
An economist and Managing Director, TrustFund Company, Mr. Chukwuma Nnadi, said before one could be a bank director; “he is already a rich man.”
“The CBN and the Securities and Exchange Commission already have a code of corporate governance for that issue. They are the regulators; so if there are abnormalities that the investors are pointing out over the years, they should know,” he added.
He also noted that the concern should not be on how big the salaries were, but on equity remuneration of the employees.
“What is the disparity between the Chief Executive Officer and other senior management staff members? If the difference is too high, then it is not good for the organisation. Banks should be careful in fixing remuneration, so that it does not affect what they are giving to shareholders in form of returns on investment,” he counseled.
INFRACTIONS
Last year, five commercial banks paid a total sum of N341 million, as atonement for contravening various rules, ranging from unutilised foreign exchange from the CBN, to late rendition of returns, and then, violations of guides on bank charges, among others.
Shareholders expressed displeasure with the fines imposed on the banks by the CBN, saying that, rather than sanction banks, the apex bank ought to have blamed and fined the banks’ chief executive officers for their recklessness in management.
According to them, the board and management of such companies should either have been sacked or made to pay the fines, instead of depleting shareholders’ funds.
Reacting to this, Okezie said the fines were becoming counter-productive, making some companies to consider delisting, as an option.
“In fact, the way regulators are charging fees and imposing fines on companies is becoming a big risk to our investments in the market. Many companies are delisting because of this situation,” he noted.
About five banks, which suffered N175 million levies in the financial year ended 2017, are Diamond bank Plc, GTBank Plc, Union Bank Plc, First City Monument Bank Plc, and Stanbic IBTC Bank Plc.
A breakdown of the banks’ financials showed that while Diamond Bank paid N28million, GTBank paid N65million, Stanbic IBTC, N60.2million; Union Bank, N12million; and FCMB, N8million; as fines to the regulatory agencies.
All details of the payments for the infractions are contained in the banks’ financial returns submitted to the NSE, for the period under review.
