FirstRand chair Roger Jardine. Picture: FINANCIAL MAIL
FirstRand chair Roger Jardine. Picture: FINANCIAL MAIL

FirstRand started a new incentive programme to retain top managers after the economic fallout of the coronavirus pandemic hit earnings and sank share-based rewards.

The ripple effect of the Covid-19 outbreak could cause managers to lose out on their share awards for years, possibly resulting in “talent leakage”, chairperson Roger Jardine said in the lender’s annual report.

SA’s largest bank by market value started the programme in September, according to the annual report. The incentives do not come with any performance conditions, and will lock in participants for the next three years, FirstRand said.

Senior managers were not granted salary increases and cash bonuses for the financial year through June in line with guidance from the Reserve Bank for lenders to conserve cash due to the uncertainty surrounding the virus.

FirstRand’s short-term incentive pool fell 43%, and rewards for executive directors and prescribed officers dropped 48%, the report said. Nonexecutive directors’ fees will not increase in 2021. Should incentives granted in 2018 and 2019 vest, the employee will be paid the higher sum of the two programmes.

As the country entered a lockdown to manage the spread of the coronavirus and most businesses were forced to close, FirstRand’s executive directors and prescribed officers waived 30% of their salaries for three months and donated the money to a support fund.

“Management should be recognised for navigating a severe operational challenge,” Jardine said.

Africa’s most industrialised nation was trapped in its longest downward cycle since World War 2 even before the coronavirus struck. Lenders responded to the outbreak by restructuring loans for companies and consumers struggling to meet their obligations, and payment holidays.

“This pandemic clearly illustrated why public-private partnerships must be at the core of SA’s national policy responses,” Jardine said. “The private sector was not sitting on the sidelines during this pandemic, it was actively engaged in assisting the government with its health-care and social responses.”

Meanwhile, FirstRand, which owns an investment bank, consumer lender, and SA’s biggest vehicle financier, is reviewing its business models to include a greater focus on climate change, the company said.

Though the firm is improving disclosure related to fossil-fuel lending, its main loan exposures are fossil fuels of R19.7bn, making up 1.5% of group loans, renewable energy of R17.9bn, accounting for 1.4% of group loans, and electric utilities of R8.7bn , making up 0.7% of total loans.

Bloomberg

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