The complexity faced by Standard Bank in 2013 has been largely simplified, eliminating the need for two CEOs, says Sim Tshabalala, the banking group’s newly announced sole CEO, after four years co-captaining the ship with Ben Kruger.
On Tuesday, Standard Bank announced the end of its joint CEO structure, which has cost the bank more than R320m over the past four years. Kruger, who volunteered to step down, remains an executive director, reporting to Tshabalala.
The earlier restructuring of the group, which included downsizing global operations, accelerating growth in Africa, adapting to new regulation and implementing a major IT transformation, had warranted the joint structure, Tshabalala said.
At the time, the decision attracted criticism, with some seeing it as the bank appointing a white CEO to oversee its first black CEO. "If I felt I was being done a favour I wouldn’t have taken the job. The decision at the time had to do with the skills I brought to the table; so too now," Tshabalala said.
Deutsche Bank, Goldman Sachs, JP Morgan Chase, SAP and Sasol are organisations that have, or had, joint CEOs.
"Both leaders generally have to demonstrate that they possess high levels of emotional intelligence beyond being technically and functionally competent," said Modise Makhene, a director at executive search firm Stanton Chase. "Joint CEO roles don’t work when the board feels under pressure to appoint and has not thoroughly assessed what they are seeking to achieve. The mistake can be a costly exercise."
Standard Bank’s co-CEOs have not come cheap. Remuneration packages for the two, including deferred bonuses, performance rewards and an equity-growth scheme, cost the bank R320.7m by the end of 2016. Granted, this may have been so even if a single CEO was appointed: Jacko Maree, who led Standard Bank for 13 years, had three generously compensated deputy CEOs. Further, the pay packages of the heads of the bank’s two largest units — personal and business banking, and corporate and investment banking — were on a par with its CEO’s in 2016.
Despite the expense, and the initial scepticism, analysts said the model had been a success. "The group’s banking operations have improved dramatically over the last four years," said Harry Botha, an analyst at Avior Capital Markets.
While uncommon, the joint-CEO model had helped the bank "improve its financial performance dramatically", said Jaap Meijer, MD of Arqaam Capital. "However, a co-CEO model also increases complexity and reporting lines, and is usually a temporary solution."
Standard Bank’s share price has risen 40% since March 2013, lagging the banks index, which is up 47%, on Capitec’s meteoric rise (+379%) and a strong showing from FirstRand (+77%).
Reporting an 11% rise in half-year profit for the six months to June, Standard Bank has endured its fair share of corporate discomfiture since 2013, including losses on credit-card fraud in Japan and metals-financing fraud in China.
Kruger’s new job description — which includes guiding the continued digitisation of the group and contributing to management of Africa regions – was deliberately broad, Tshabalala said. The remuneration committee would decide on his remuneration "in due course".
In a note to staff, Tshabalala fondly referred to Kruger as "Pliny the Elder [Roman philosopher] for his encyclopaedic banking knowledge, wisdom and beautiful humanity."