Here’s why shareholders should take a closer look at the CEO compensation package of Standard Bank Group Limited (JSE: SBK)

The results at Standard Bank Group Limited (JSE: SBK) have been quite disappointing recently and CEO Sim Tshabalala bears some responsibility. Shareholders will be interested in what the board of directors has to say about the recovery in performance at the next AGM on May 27, 2021. It would also be an opportunity for shareholders to influence management by voting on the resolutions of the business such as executive compensation, which could business significantly. We present the reasons why we believe that CEO compensation is out of sync with company performance.

See our latest analysis for Standard Bank Group

How does Sim Tshabalala’s total compensation compare to other companies in the industry?

At the time of writing, our data shows that Standard Bank Group Limited has a market capitalization of R192b and reported total annual CEO compensation of R24 million for the year through December 2020. That is a notable decrease of 51% compared to last year. Although we always look at total compensation first, our analysis shows that the salary component is smaller, at 9.4 million Rand.

In comparison to other companies in the industry with market capitalizations above R112 billion, the reported median total CEO compensation was R33 million. We infer that Sim Tshabalala is paid around the median of industry CEOs. In addition, Sim Tshabalala also owns Rand 67 million of Standard Bank Group shares directly under his own name, which tells us that they have a significant personal interest in the company.

Component 2020 2019 Proportion (2020)
Salary R9.4m R8.8m 39%
Other R15m R40m 61%
Total compensation R24m R49m 100%

In terms of industry, salary made up around 26% of total compensation for all the companies we analyzed, while other compensation made up 74% of the pie. The Standard Bank Group pays a higher share of its remuneration in the form of salary compared to the industry as a whole. If non-salary compensation dominates total compensation, it is an indicator that the executive’s salary is linked to the performance of the company.

JSE: Remuneration of the CEO of SBK May 21, 2021

Growth of Standard Bank Group Limited

Over the past three years, Standard Bank Group Limited has reduced its earnings per share by 22% per year. He has seen his income drop 10% over the past year.

Few shareholders would be happy to read that EPS has declined. This is made worse by the fact that revenues are actually down from last year. Given this relatively weak performance, shareholders probably wouldn’t want to see high compensation for the CEO. Stepping away from the current shape for a second, it might be important to check out this free visual representation of what analysts expect for the future.

Has Standard Bank Group Limited been a good investment?

The -30% return over three years would not have pleased the shareholders of Standard Bank Group Limited. The shareholders would therefore probably want the company to be less generous with the compensation of the CEO.

To conclude…

Given that shareholders haven’t seen any positive return on their investment, let alone the lack of earnings growth, this may suggest that few of them would be willing to give the CEO a raise. At the next AGM, the board will have the opportunity to explain the measures it plans to take to improve the performance of the company.

While paying attention to CEOs is important, investors should consider other parts of the business as well. We did our research and spotted 2 warning signs for Standard Bank Group that investors should consider moving forward.

Arguably, the quality of the business is much more important than the compensation levels of CEOs. So look at this free list of interesting companies that have high return on equity and low leverage.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. We aim to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative information. Simply Wall St has no position in any of the stocks mentioned.
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