- High emoluments reducing profits – Shareholders
With the economy in technical recession and an already troubled banking industry down-sizing massively as part of measures to reduce overhead cost and stay profitable, there are indications that the high remuneration and allowances being drawn by bank directors may continue to hinder growth in the financial sector.
While shareholder groups and industry analysts continue to bemoan dwindling financial health status of the institutions, findings by The Point revealed that 12 out of the 24 banks in the country paid 161 directors a total of N11.23 billion in remuneration and other allowances in the 2015 financial year alone.
This is aside from several other allowances that cater to such services as domestic staff, which are uncaptured.
The banks are First City Monument Bank, Skye Bank, First Bank, Guaranty Trust Bank, Access Bank and Union Bank. Others include Diamond Bank, Fidelity Bank, Wema Bank and Sterling Bank, among others.
An analysis of the bank’s annual reports and account for 2015 showed that the total amount of money paid to the 161 directors increased by 13 per cent, up from N8.86 billion in 2014 to N11. 23 billion last year.
A bank source told our correspondent that the amount of money paid to the directors represented about two per cent of the profit before tax of the 12 banks, which stood at about N654 billion in 2015. The amount paid to the directors also represents 3.11 per cent of total staff salaries (personnel cost) for all the banks. According to the source, the directors live flamboyantly at the expense of the majority staff.
He said that, ironically, while the hierarchy of the banks are cutting down on staff salary and even replacing experienced graduate members of staff with much younger holders of Ordinary National Diploma, all in a bid to reduce the overhead, their remuneration have remained untouched.
He said, “In asking some of the old hands to go, the management often blame the economic recession, saying that the junior staff with enough stamina can even do the job of the senior ones if well trained.
“As a result, most senior staff members across the banks now go to work in palpable fear.”
Meanwhile, a close look at the banks’ financial statements also showed inadequate disclosures as they relate to compensations and allowances to board chairmen and salaries of chief executive officers of some of the banks.
For example, Access Bank and Sterling Bank failed to disclose the amount of money paid to their chairmen and chief executive officers, while Wema Bank did not specify the amount paid as compensation to executive directors in 2015.
Board Expenses
GTBank led the 12 banks with about N1.25 billion paid to its 14 directors in 2015, up from N1.2 billion in 2014. Zenith Bank followed with N1.145 billion paid to 10 directors in 2015, up from N630 million in 2014. Access Bank and First Bank were third and fourth, respectively, with N1.08 billion and N1.05 billion paid to 14 and 17 directors in the same order.
Others are FCMB, which paid 10 directors N886.3 million in 2015, up from N881. 4 million in 2014 and UBA, which paid N603 million to its 16 directors in 2015, up from N600 million in 2014. Union Bank paid N983 million; Diamond Bank – N195 million; Sterling Bank-N265 million; Fidelity Bank-N766 million; Wema Bank-N235 million and Skye Bank N639 million.
Executive Directors’ Compensations
The 12 banks, with the exception of Wema Bank, paid N5.63 billion to 88 executive directors. This represented a 19.15 per cent increase from N4.72 billion in 2014. On the average, each executive director got N63.97 million in 2015.
First Bank led in terms of how much its six EDs were paid, which amounted to N784 million, up from N694 million in 2014. GTBank came second, with N718 million paid to six EDs, up from N691 million. The seven EDs of Access Bank were paid N705 million in 2015, down from N1billion in 2014. Union Bank paid its six EDs N625 million in 2015, up from N542 million in 2014; Zenith Bank paid its four EDs N595 million in 2015, up from N414 million in 2014; while UBA paid its six EDs N547 million, down from N555 million in 2014.
FCMB paid four EDs N533.7 million, while Skye Bank paid N390 million to its eight EDs. Others were Diamond Bank with five EDs – 149 million; Sterling Bank with six EDs – N156 million; and Fidelity with six EDs – N346 million.
CEOs’ Salaries
An analysis of the amount paid to the highest-ranking director, the Chief Executive Officer by eight banks revealed that their CEOs received N903 million as salaries and compensations in the year under review. This was 13 per cent higher than the N798 million paid to them in 2014.
The CEO of Union Bank received the highest pay with N208 million, representing 26 per cent or N55 million increase from the N153 million earned in 2014. GTBank CEO earned the second highest, N204.9 million, up by N22 million from N183 million in 2014.
The CEOs of UBA and Fidelity Bank followed. They received N125 million and N102 million, respectively, in 2015, up from N116 million and N94 million in 2014.
Others are First Bank – N90 million; Zenith Bank – N78 million; Wema Bank – N70 million; and Diamond Bank – N25 million.
Infractions
Last year, eight banks paid a total fine of N3.323 billion for contravening various rules, including late remittance of funds under the Treasury Single Account guiding the Nigerian banking industry.
Shareholders in the financial market have expressed displeasure with the fines imposed on the banks by the Central Bank of Nigeria, saying that, rather than sanction banks, the apex regulator ought to have blamed and fined the bank’s 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.
The National Coordinator, Independent Shareholders Association of Nigeria, Mr. Sunny Nwosu, expressed concern over the amount paid by the banks for committing infractions. He said the monies paid would have yielded higher dividends for shareholders and implored banks to be careful and avoid wastage of shareholders’ funds.
The eight banks’ financial statements for the year ended December 2015, showed that FCMB paid a total fine of N177.09 million; Fidelity Bank paid N44.5 million; Guaranty Trust Bank paid N6.05 million; Sterling Bank, N13 million; UBA, N2.968 billion; Union Bank, N46.28 million; while Wema Bank and Zenith Bank paid N8.087 million and N60.1 million respectively.
FCMB was fined N126 million for failure to carry out due diligence and non-rendition of suspicious transaction report in respect of customers. It was also fined N25 million for foreign exchange sales infractions to Bureau de Change, with total infractions of the bank numbering 11.
Zenith Bank was last year fined for nine infractions, paying N32 million as penalty in relation to reporting of public sector deposits. It was also fined N10 million for fraudulent NIBBS instant pay from an account in Enterprise Bank to the Valluci Properties Limited.
Union Bank had committed eight infractions with a fine of N18 million paid as penalty in respect of public sector funds and N14 million for non-compliance with CBN guidelines for appointments of staff to top management positions.
Fidelity Bank paid N44.5 million as fines for eight infractions with the largest fine it paid being N28 million as penalty payment on CBN FINA returns.
With a total of four infractions, Sterling Bank had been fined for not complying with deadline for transfer of funds to TSA as well as delay in response to CBN directive in respect of reporting lines of the Chief Compliance Officer, among others.
Union Bank was also penalised for not rendering returns on Anti- Money Laundering and Financing Terrorism, granting Loans without BVN and for failure to meet TSA deadline.
Guaranty Trust Bank on its own part was fined for delay in transmitting the list of TSA names to the CBN, late rendition of returns and contravention of CBN circular on prior clearance of prospective employees of banks.
Mixed reactions from shareholders, investors
Speaking with The Point, a sizeable number shareholders and investors said that the economic situation of the country ought not to tolerate high remuneration and allowances for bank directors.
Chairman, Proactive Shareholders Association of Nigeria, PROSAN, Mr. Taiwo Oderinde, said the huge amount of money paid to directors was unfair to shareholders. “The banks’ executive 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 remunerations and asked them to go back and review it downwards,” he said.
Oderinde explained that the problem with the shareholders was that in some cases, they did not have shareholders’ representatives on the board.
He said, “By the time they set up committees to review the remuneration, you will only see executive directors taking decisions. The executive directors are really feeding on shareholders’ fund and this has to be checked by the regulators in the industry.
“The EDs have access to our funds and make use of it the way they like. I think there should be regulation in this aspect of emolument to stop these mouth watering packages.”
A shareholder activist, who preferred anonymity, said it was not about how big or small the packages were, “the concern should be on the equity remuneration of employees. What is the disparity between the Chief Executive Officer and other senior management? 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 said.
Renaissance Shareholders Association of Nigeria ambassador, Olufemi Timothy, said, “The banks’ executive emolument is not too much considering the earnings they make for the bank. These are people who toil all day and night to see that depositors’ money is kept safe. So the high-risk element should also be another great reason why they should be well paid. Even the so called Foreign Exchange, (forex) are kept by these banks.”
He noted that if banks’ executives were well paid, the issue of stealing or fraudulent practices would be drastically reduced or even eliminated.
“I believe 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 member of the shareholders’ group, Alhaji Razaq Iyiola, however, maintained that the amounts paid to banks’ directors were huge and should be reviewed.
“The shareholders’ funds keep going down. Considering the economic downturn, the banks can reduce the directors’ packages to reflect the present economic realities. If state governors and ministers are cutting their salaries, I think the banks should follow suit,” he said.
