董事的高薪酬外文翻译.docx

1、董事的高薪酬外文翻译INVESTEC EMPLOYEE BENEFITSDirectors pocket fat pay packetsBy: Basson, Deon. Finance Week,But policyholders deficits not yet made upDiscusses the financial statements of Investec Employee Benefits (IEB) in the South Africa. Total profit for 2003 and 2004; Comparison of the total emoluments

2、earned by the executive directors; Conflict of interest between shareholders and policyholdersTwo executive directors of investec Employee Benefits (IEB) - Ciaran Whelan and Ademda Anumashahun purportedly earned directors emoluments totalling R18m in the financial year to March 2004.IEB was formerly

3、 known as Fedsure Life and was a wholly owned subsidiary of the then listed Fedsure. In 2001, this assurer was taken over by Investec in a controversial transaction that led to considerable difference of opinion between the two campsThis snippet of information is contained in the latest IEB financia

4、l statements submitted to the Financial Services Board. IEB is an unlisted subsidiary of Investec and is therefore not subject to the JSE Securities Exchanges listing requirements in terms of which directors remuneration must be disclosed on an individual basis.Though IEBs financial statements for t

5、he year to March 2004 indicate better returns for policyholders, the companys still a long way from making up its historical backlog. Investec, as the only shareholder in IEB, is faring considerably better.The income statement shows total emoluments for executive directors of R18m -with Whelan and A

6、numashahun stated in the directors report as the only executive directors. If that information is correct, then each earns an average of R9m/year.IEB is a classic case of a conflict of interest between shareholders and policyholders. The cause of the problem was in fact the takeover, with Investec p

7、aying too much for IEB. The acquisition price was R4,5bn, of which R250m was paid in cash and the remainder by issuing 19,2m Investec shares.Compare that with the remuneration earned by the executive directors of Old Mutual pics wholly owned unlisted subsidiary Old Mutual Life (SA). The three execut

8、ive directors - Roddy Sparks, Peter de Beyer and MP Moyo -together earned a total of R9,2m in the financial year to December 2003. Sparkss remuneration was about R3,5m, De Beyers R3,4m and Moyos R3,3mAfter that Investec was faced with the unpleasant reality of IEB having too little capital. The reas

9、on for that was the amalgamation with Norwich Life that had to be finalised. Some time before Norwichs former holding company, Norwich Holdings, was taken over by Fedsure in 1998, it was clear that Norwich Life had too little capital (.Finance Week, 24 March 2000 and 1 December 2000)The remuneration

10、 of IEBs directors is relevcint as many policyholders in this company have historically been dissatisfied with the poor returns made on their investments，Even before the IEB takeover was finalised, Investec had poured R500m of new capital into the company. After the official takeover, another R600m

11、followedThe policy debate that started at end-2004 focused the attention on SAs three largest insurers. Almost forgotten in this debate is Investec Employee Benefits, which ran into trouble over the past few years and whose policyholders have good reason to feel dissatisfied.So the total cost of the

12、 investment was a massive R5,6bn. With so much capital invested in IEB, its understandable why Investec would want to get its capital back as soon as possible. In the banking sector, a banking groups return on equity is looked at very critically.In December 2000, IEBs embedded value was R2,6bn, whic

13、h already included the first R500m of new capital. So its a case of an assurer acquired at an almost unheard of premium above its embedded value.The other side of .the coin is policyholders interests. They in fact lost out spectacularly, because of the drama that occurred after the two takeovers. In

14、 an inspection in 2003, advocate Flip Stander and Professor George Marx concluded that the reasonable expectations of policyholders werent met between 1999 and 2002. Of course, that included the period before and after the takeover by Investec.They also said that not all policyholders were affected

15、equally. At the time of their inspection they were satisfied that IEB had taken sufficient precautions to compensate policyholders for their historical losses.The results for the financial year to 31 March 2003 were only published after the completion of Marx and Standers inspection. In that particu

16、lar financial year, IEB declared an exceptionally big operating profit of R843m. An early cover report concerning that (FW, 3 December 2003) elicited angry responses in Investec circles.Whelans view was that the large operating profit (see table 1) and the subsequent increase in IEBs net asset value

17、 were virtually neutralised by a loss in embedded value.Assurers embedded value consists of NAV and the value of the in-force book. The latter is the discounted Vcilue of future profits from insurance.Since 2001, IEB has sold a significant share of its book to Capital Alliance and also reinsured a c

18、onsiderable portion of its risk with the same insurer. The loss in the value of the in-force book is largely the result of that.It was clear at the time that IEB didnt want the perception created that Investec was earning large profits as a shareholder while policyholders were being hard done byIt n

19、ow appears from the financial statements for 2004 that in this financial year policyholders did significantly better than in either of the two preceding financial years (see also table 2). However, its doubtful that theyre doing well enough to make up for the poor returns in preceding yearsThe retur

20、ns shown (table 2) must be explained. They arent the returns earned by individueil portfolios or the bonuses declared. Theyre simply the returns earned by IEB In total. One would, of course, expect some kind of correlation between these returns and the bonus rates.From the financial statements, the

21、following can be deduced: Shareholders earn better returns on their capital than policyholders earn on their investments (tables 2 and 3). Since 2000, IEBs embedded value has increased from R2,6bn to R4,3bn. If the R600m new capital added during the 2002 financial year is taken into consid have litt

22、le cause for complaint. Policyholders earnings are substantially diluted because of IEBs cost structure and profit margins (table 2). For example, in 2004 the gross investment return was 14,5% but the net investment retum was only 9%. In 2004, the operating profit of R168m (table 1) earned for share

23、holders contributed 1,1 percentage points to the dilution of policyholders investment return (table 2). In 2003, the corresponding figure was an astonishing 4,2 percentage points. Its striking that the huge decline in operating profit occurred despite substantially higher returns earned for policyho

24、lders. Though shareholders stiU did very well, there are indications of greater sensitivity for the interests of policyholders than in 2003. Administration costs remain high at R176m, especially considering that policy liabilities fell by around Rlbn. That also contributes about 1,1 percentage point

25、s to the dilution of policyholders investment return (table 2). The directors remuneration for Whelan and Anumashahun make up more than 10% of the admin expenses. Whelan and Anumashahun are appointed by a board, which is controlled by Investec. As in any capitalist environment its probably fair to a

26、ssume that adding value for shareholders is an important factor in determining remuneration structures.What is more certain, however, is that bank pay will continue to be the subject of considerable public and private attention. For as long as the media are convinced of the public appetite for tales

27、 of bankers receiving multimillion dollar payoutswhich is likely to be the case for as long as the economic recession persistsfinancial institution compensation practices will make headlines, and clamors for reform will continue. Unfortunately for financial institutions, who will continue to worry a

28、bout their ability to compete for talent in the face of potential limitations on how much and what kinds of pay they can offer, and for whom the burdens of compliance and disclosure with increased regulation will not be inconsiderable, governmental oversight of pay will be around for a long time to

29、come.Although the full impact of the Final Guidance would not be known for some time, the Fed has already taken steps to review incentive compensation programs for deficiencies. In the announcement of the adoption of the Final Guidance, the Fed indicated it had completed the first round of an in-dep

30、th analysis of incentive compensation practices at large, complex banking organizations, which was part of the Feds formal “horizontal review” of incentive compensation practices announced in the Proposed Guidance. The purpose of this initiative, the Fed stated, to be carried out by a multidisciplin

31、ary group of staff consisting of economic, legal, financial and accounting experts, was to enhance the Feds understanding of current practices and proposed changes to those practices, assess the strength of current controls, inform itself as to current corporate governance, and identify emerging pra

32、cticesIn addressing this issue, the Final Guidance states plainly that boards of directors should directly approve incentive compensation arrangements for senior executives. The Final Guidance emphasizes that boards of directors have ultimate responsibility to ensure balance in the incentive compensation arrangements for all covered employees, and urges boards to be active in their oversight of incentive compensation arrangements. To be effective in this role, boards may need to rethink their structures and must have resources at their disposal in the form of counse