Aweh fellow Ruminants & Groupies in day 342 of Re-Modified Lock Down Now Level 1.
Remaining Life at Sasol: 26 days
In a few weeks this e-mail will cease and the Friday ruminations will move to my blog.
Today’s topic is one that is considered very vulgar in genteel society namely what you get paid. This is awfully confidential and you are encouraged to keep it that way. If you knew that the significantly younger, much less competent person skilled at ingratiating themselves with the bosses sitting next to you earns 30% more than you it could ruin your composure and cause you to lose all your mirth. By maintaining confidentiality one can avoid unseemly and unnecessary discussions and arguments. Since Ruminant Pink Friday™ is not deterred by vulgarity this is an entirely suitable topic.
Of course when it comes to the pay of CEO’s and senior executives disclosure rules for public companies require that their remuneration be published in full. Despite the vulgarity of remuneration it has been my consistent observation that the very first thing many lower level (vulgar) employees do as soon as the annual report or 20F submission is published is study the remuneration report. Indeed there are some exceedingly vulgar employees who only look at this section and couldn’t be bothered with the rest. Not me of course.
The topic of CEO pay has been covered in previous ruminations. https://wordpress.com/post/ruminantpinkfriday.wordpress.com/174. A comprehensive study into CEO pay in South Africa concluded that there is a weak relationship between CEO pay and company performance and that total shareholder return is negatively correlated with CEO pay. This is not unique to South Africa and similar studies referenced in the submission show similar results for other countries. There is a very simple explanation for this. No self-respecting remuneration committee will accept that their executives have below average pay. This will surely lead to disaster. Now it is a simple fact of mathematics that everyone can’t be above average so we have a race to the sky and an upward spiral of pay. Of course this is unsustainable and there is now considerable noise concerning executive pay but the bar is very high.
I now want to turn to the pay of corporate lance corporals and will reflect on my own experience as my corporate career draws to a close. It is established wisdom that employees should create shareholder value and that if they do they should share in the value creation. I have plotted below the Sasol share price in Ruminant Pink™ since 1999.
I started the graph in April 1999 when I was 38 and the share price was R26 and the oil price was $15/bbl. The significance of this date is that I was awarded a large number of share options at R26 (it would be vulgar to reveal how many). From there the oil price began a dramatic rise over the next 9 years and the share price passed R400 in April 2008 when the oil price was $119/bbl. I confess to cashing in most of my share options above R400. Many of my true blue colleagues of our generation hung on to their shares but I confess to the disloyal act of diversifying my assets offshore.
I have little doubt that the remuneration committee in 1999 had no idea of what was going to happen in the coming decade. Colleagues of my generation received a once in a lifetime windfall. Of course during this decade I toiled valiantly on a number of projects which I hope added value but to be honest their contribution was dwarfed by the rise in the oil price. My wife, Nerine, fairly accused me of working too hard and neglecting our family.
I am of course extremely grateful for the windfall I received and it made an immense difference to our family and is an enabling factor in my early retirement. Did I deserve this? (Of course!).
The cold hard reality is that I was in the right place at the right time. I was lucky.
I am not going to comment on what has happened to the share price since March 2017 since many barrels of ink have been used by learned journalists and analysts to document that.
I will leave it to you to think about what the next 10 years holds for today’s 38 year olds in the fossil fuel industry.
I know that many of you are both more timid than me and have not yet reached my life stage and I look forward to you continuing to submit ideas for potential discussion.
Thank you very much for the many helpful suggestions and input which I’m researching and please keep the submission ideas flowing.
Regards
Bruce
Ruminant Pink Friday 