Wednesday, August 12, 2020 / 05:00 AM / By
Proshare Research / Header Image Credit: EcoGraphics
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.
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:
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.
Downloadable Versions of 2020 Report (PDF)
Previous Year's Report and Links
Related News from CEO Remuneration 2020 Report
1. Top 10 highest earning CEO's in Nigeria - Nairametrics - July 10, 2020
2. Tinubu, Avuru top list of highest paid CEOs of quoted Nigerian companies - BusinessDay - April 23, 2019