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Recession: Directors pay package drops 13%

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… Directors of banks, oil companies earn N13.4bn
…As shareholders kick

By Peter Egwuatu

As recession pummeled corporate financials, about 54 leading companies quoted across the sectors of the Nigerian Stock Exchange, NSE, took a 12.9 per cent cut on their emoluments and other remuneration packages in 2016 financial year, FY’16.

But though the FY’16 of the affected companies indicated that total amounts accrued to them went down to N17.6 billion, almost 13 per cent from N20. 22 billion in 2015, some banks and oil companies still smiled home with fat pay packages, causing some shareholders’ groups to raise concerns.

However, the cuts effected by some of the companies was contrary to the regular yearly upward adjustments which the Boards of Directors usually recommended at backdrop of inflation uptick. Consequently, for those companies they  accounted for the overall drop, their directors’ remuneration was negative to inflation which rose by average 18 per cent during the year.

And also, this came against a 14.3 per cent rise in the Profit Before Tax, PBT, of these companies.

Some managing directors of corporates that spoke to Financial Vanguard admitted that the financial year 2006 was very though and challenging, necessitating some cuts in costs.

For instance, the Managing Director of Sterling Bank Plc, Mr.  Yemi Adeola , said : “ Nigeria faced its worst economic crisis in a generation, dragged principally by external shocks arising from the persistent decline in the market price of crude oil . Unfortunately, these external shocks exacerbated by the seemingly slow and tentative government response. Foreign investment flows to the country declined considerably with portfolio investors gravely concerned about the lack of adequate liquidity in the official foreign exchange market. This really put pressure on asset valuations across the economy with fixed income instruments and listed equities particularly affected.  Given this scenario, we had no choice than to curtail our expenses, while maintaining good services to our depositors.”

In same vein, Managing Director of Unilever Nigeria Plc, Mr.Alfred Nsarkoh, complained of high cost of running its businesses.

According to him “Unilever Nigeria is not insulated from the tough economic environment, we have remained focused on our short and long term growth ambitions with strong emphasis on operational intensity, cost efficiencies, growing market share across key categories as well as reinvesting behind our iconic brands”.

But company tax increased

A cursory review of the corporate’ performances in the year 2016 by Financial Vanguard revealed that the 54 companies paid a total income tax of N241.7 billion to the government, representing 37 per cent of their combined PBT of N654.8 billion.

Meanwhile, the entities captured in this review are 14 companies from the banking sector ; 10 companies from insurance sector; 5 companies from Industrial Goods and Conglomerates sectors, 8 companies from the Oil and Gas sector; 5 companies from Agric sector and 7 companies from Food Products sector.

Sectorial Review

The sectorial review showed that the banking sector topped other sectors in terms of remuneration and emolument paid to directors, both executive and non executive during the review period.

In fact, in absolute figure, Guaranty Trust Bank, GTB, led the banking sector as the directors were rewarded N1.4 billion as their total package; it was followed by Union Bank with N1.2 billion and First Bank of Nigeria Plc came third with N1.1 billion.

Wema led increases in directors’ earnings

In percentage term, Wema Bank led the sector as the emolument and remuneration of its director increased by 85 per cent to N434 million from N235 million in 2015. Trailing behind is Union Bank, which increased the emolument and various remunerations for its directors by 39 per cent to  N1.2 billion from N946 million in 2015, while the emolument  for directors of United Bank for Africa, UBA went up by 16 per cent to N687 million from N590 billion in 2015.

Apparently, the directors of banks earned increased emoluments due to equally increased profit, where they also led other sectors.

The banking sector recorded a PBT of N644.4 billion and accounted for 98 per cent of the cumulative profit declared by the 54 companies. It was followed by the Food Products sector, which recorded N63.5 billion, while Agric sector recorded N35.4 billion.

Meanwhile, the losses recorded by some companies in the Industrial, Conglomerates and Oil and Gas sectors diluted the overall profit figure of the 54 companies.

On the tax payment to the government, the banking sector equally topped the chart in absolute terms as it paid N104. 3 billion for the year under review. Trailing behind is the Oil and Gas sector, which paid N52.3 billion, while Industrial Goods sector came third with a tax value of N40.4 billion.

Oil & Gas led in size of directors’ earnings

A breakdown of the sectors showed that even though the banking sector led other sectors on remuneration and emolument, Oando  Plc topped on the overall packages with N1.9billion. This was followed by another oil company, Seplat Petroleum, in which the directors were paid N1.76 billion.

In the Oil and Gas sector, Oando, Seplat and Mobil Oil are the top leaders in terms of pay packages for directors. The sector accounted for 25 per cent of the overall amount paid to directors of the 54 companies.

In the Food Product sector, Dangote Flour Plc topped the chart on directors’ emolument and remuneration as it recorded N442 million, thus accounting for 27.5 per cent of the sector’s package. Next was Unilever with N352 million, accounting for 22 per cent of the sector’s remuneration for directors , while Dangote Sugar occupied third position on the chart, and accounted for 16 per cent of the sector’s  total.

Meanwhile, the Insurance sub sector, which paraded Custodian and Allied Plc, Unity Kapital Assurance, AIICO Insurance, NEM Insurance, LASACO Assurance, Cornerstone Insurance, Axa Mansard Insurance, Law Union & Rock Insurance and Regency Alliance Insurance, recorded N1.3 billion as directors’ emolument and remuneration. The sector accounted for 7.4 per cent of the overall emolument and remuneration paid  directors during the year under review and ranked fourth on the chart.

On PBT, the Insurance sector accounted for just about 3.0 per cent of the overall sectors’ PBT and 2.0 per cent of tax paid to the government. This sector was most affected by the economic recession and harsh operating environment that prevailed during the period.

Stakeholders’ reactions:

Some of the shareholders of these companies who spoke to Financial Vanguard over this development expressed mixed feelings.

The Chairman, Progressive Shareholders Association of Nigeria, PSAN, Mr. Boniface Okezie said “Well, I know we are in recession, but that does not mean that our directors should not be well remunerated. But though, some of them live flamboyant way of life, I think given the period we are now, companies should continue to cut cost especially by eliminating expenses that can be avoided. Some directors embark on trips abroad without any plausible reason. If it is trip that will enhance the bottom line of their companies, then that should be approved. I am not against companies paying good salaries to their staff that add value to the organisation . In fact, that should be encouraged as this will make them work hard as well as not to compromise by stealing or otherwise”

In his own comment, the National Coordinator, Proactive Shareholders Association of Nigeria, PROSAN, Mr. Oderinde Taiwo said “This is the period that companies should eliminate waste.  Many directors of companies, especially the non executive directors have formed the habit of showcasing their wealth unnecessarily. I am not in support of companies increasing the emoluments of directors.

The directors fix remuneration for themselves even though the Companies and Allied Matters Act, CAMA, stated that shareholders are supposed to approve the remuneration of directors and auditors.

Mrs. Bisi Bakare, another shareholder, opined that shareholders are the ones that suffer most when profits are not declared by companies. The directors get their allowances, fees and other remuneration at ease. The shareholders don’t get dividend if profit is not declared. I would like the board of directors of companies to always do the needful by adopting cost effective measures that would always boost shareholders’ value.”

The Chairman of Forum for Shareholders Association of Nigeria, Mr. Itipah Emmanuel, said “The board of directors of companies are the ones that determine what goes to them. I think this is an area that the regulatory authorities need to come in.  There should be regulatory standard for the payment to auditors and as well as directors. The non executive directors should not be give fat allowances at the detriment of shareholders.”

 

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