The Post-COVID-19 Era Will See a Significant Reshaping of Corporate Realities

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Wednesday, August 12, 2020 / 05:00 AM / By Proshare Research / Header Image Credit: EcoGraphics


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The post-COVID-19 era will see a significant reshaping of corporate realities. The concept of the CEO as the mighty lord of the manor may gradually give way to new thinking about how organizations are run and how their top executives should be remunerated. The nexus that links executive pay to corporate performance may become tighter as shareholders begin to insist on stronger ties between CEO compensation and returns on shareholder's funds, or corporate equity, and perhaps some measure of compound average revenue growth over a prescribed period. The CEO remuneration to shareholder return permutations is fairly extensive.

 

CEO rewards naturally differ across industries, fast-growth industries such as tech businesses generally see a spirited rise in executive pay as corporate fortunes and collapses spin on the toss of a coin as revenues are gingerly hinged on user patronage and the quality of the user experience and interface (UX/UI). But this is not to say that more traditional businesses such as Telcos (MTN Nigeria) and Banking (GT Bank) may not equally witness spikes in CEO pay if revenues and bottom-line earnings remain robust. Indeed, the report showed that in fast-moving consumer goods (FMCGs) sector executive pay remained resilient in 2019 even though past outlook and prospects of the bigger companies in the sector remain grim. Interestingly of the top ten highest-paid corporate executives in Nigeria in 2019, four (4) of them came from the FMCG sector even where the company was making losses (as in the case of Unilever) or was witnessing melting revenue (-8% between 2018 and 2019) and flatlining profit (-33% between 2018 and 2019) as was the case with Guinness.


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The revenues and profits of companies in 2019 were not close predictors of CEO remuneration. Some companies did well and their CEOs received bigger bank account sizes (as in the cases of MTN Nigeria and GT Bank), while other companies did poorly but their CEOs still got a heavy payday (as in the case of Nigerian Breweries). The report equally highlighted the existence of companies who did poorly and got a few millions of Naira knocked off their CEO's annual pay packet (as in the case of Unilever).  

 

Overall, CEO remuneration for companies listed on the Nigerian Stock Exchange (NSE) in 2019 was a rainbow of outcomes ranging from the sober and rational to flagrantly unexplainable. What is clear is that in a post-COVID-19 reality the state of play for companies will have to change, depending on their taste for sustainability. Some urgent actions would be needed, including but limited to the following:

 

  • A realignment of CEO pay with a sustainable business outlook/model
  • Extensive and intensive scenario planning to handle threats and exploit opportunities as strengths and weaknesses remain primarily internal matters that can be taken care of within the company.
  • A reassessment of operating expenses (OPEX) and capital expenditure (CAPEX) against the background of a projected revenue decline in 2020 and a possible mild recovery in 2021
  • An assessment of all supply chain vulnerabilities and the development of disaster recovery frameworks by way of a disaster recovery plan (DRP) is critical to corporate stability in a post-COVID-19 world. The strategy builds around a recovery framework based on a worst-case business scenario. Such an approach allows the company to be proactive rather than reactive and buys it time
  • Understanding and modeling consumer nuances would be crucial to creating sustainable revenues and cash flows that would keep the heart of the business ticking. At this period CEOs should be less perturbed by temporary drops in remuneration and more honed into building product and brand loyalty that is based on product or service value. Companies in the FMCGs sector like Unilever may need to review its portfolio of products and decide winners or potential winners and outright losers and sell what can be sold while at the same time reducing the cost-of-carry of slow-moving inventory. The new market play is about analytical rigour, speed, and precise execution, these characteristics will separate one board from another. The CEO's job would be to be the corporate chief visioner, understanding the curved balls around the corner and hitting them out of the park as opportunity meets preparation, or what the average persons wrongly perceives as luck.

 

In the emerging business landscape, corporate laggards will suffer and those that are reluctant to take hard-stick swerves into a new corporate lane leading through a fresh operating journey may find that the market has left them behind, perhaps permanently.

 

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Downloadable Versions of 2020 Report (PDF)

1.      Executive Summary: CEO Remuneration 2020 Report - Paying the CEO in a Pandemic; The Unanswered Questions  July 30, 2020

2.     Full Report: CEO Remuneration 2020 Report - Paying the CEO in a Pandemic; The Unanswered Questions  July 30, 2020

 


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Previous Year's Report and Links

1.          CEO Remuneration 2019 Report: Making Sense of the Numbers for Listed Companies in Nigeria  July 30, 2019

2.         Full Report: CEO Remuneration 2019 Report - Making Sense of the Numbers for Listed Companies in Nigeria   July 30, 2019

3.     All Quoted Companies IR Pages - Proshare MARKETS


 

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Related News from CEO Remuneration 2020 Report

  1. The New Productivity Gamble
  2. Shareholder's Declining Influence
  3. Power In The Boardroom
  4. Executive Compensation and Shareholders Value Creation
  5. COVID-19 and The New Compensation Normal
  6. The Upside of Rationality
  7. Nigeria's Top Ten Income Earning Executives
  8. The Many Sides of CEO Compensation
  9. Executive Pay and Theoretical Approaches
  10. Between 2019 and 2020: Understanding The New Realities of CEO Remuneration
  11. CEO Remuneration 2020 Report - Paying the CEO in a Pandemic; The Unanswered Questions

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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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