Inside Investing: Sanlam CEO on bumper pay package; CemAir; US markets, bank stocks

Written on 10/15/2020
Jarryd Neves

In Inside Investing, we talk to CEOs of Sanlam, CemAir, discuss the US election and markets and look at why Visa, Mastercard are interesting prospects.

Welcome to episode five of the BizNews podcast which exposes newinvestment opportunities and offers fresh ideas on investing andmoneycraft. In this episode, new Sanlam CEO PaulHanratty explains why his much discussed pay package aligns his owninterests with those of shareholders; market commentators DavidShapiro and Adrian Saville provide a guide to what investors shouldexpect from share prices if Donald Trump wins another term – or JoeBiden is voted into office; there’s news from Cemair’s Miles van derMolen on how the local aviation sector is adapting after SA’s skies were reopened two weeks ago; and a top US banking analyst looks at thisweek’s quarterly results and explains why Visa and Mastercard are now highly investible. – Alec Hogg

On the Rational Radio webinar earlier this week, Sanlam’s new CEO Paul Hanratty got to answer some difficult questions about his switch over after more than three decades at arch rival Old Mutual. But the toughest questions related to his much discussed remuneration deal.

After listening to his responses, however, any rational mind would surely be taking a closer look at an investment in Sanlam stock – As Hanratty explains, he negotiated to bet as much as possible on an appreciation of a share price that’s done nothing for the past five years.

With three weeks to go before the US presidential election, Joe Biden is set up as the proverbial racing certainty with an 11-point lead in the polls. But we’ve seen this movie plenty of times before – Hilary and Obama; Hilary and Trump; Brexit Leave or Stay – As the two candidates are so different, share market investors are paying closer attention than usual.

So I asked SA’s favourite market commentator David Shapiro and Cannon Asset Management founder Adrian Saville for guidance on what is likely to happen to stocks afterthe election.

We close off this episode with some pretty direct Wall Street advice on US banking stocks in the wake of the quarterly results released earlier this week. In this clip, Vonnie Quin of our partners at Bloomberg talks to Ken Leon, Global Director of Industry and Equity Research at CFRA Research.

This episode of Inside Investing was proudly brought to you by CemAir. For the latest domestic and regional flights go to FlyCemAir.co.za

Sanlam CEO Paul Hanratty talks to Alec Hogg about his much discussed remuneration

Paul, there are a couple of questions about your bonus share. The one says, you’ve only been appointed as an executive director of Sanlam for three months and then a three million bonus share deal worth R161-million was awarded in advance? How does this work and on what basis is it justifiable? 

Then there’s another one, that puts the figure at R235-million. So I guess you better give us an idea on what the numbers are. As a welcome gift, is it a bit excessive, they ask, when we have such disparity. What is the story behind all that? 

Firstly, it’s been poorly reported. As you know, there are reporters who don’t bother getting any facts before they write things. So I personally think that if I was a shareholder in Sanlam, I would be delighted because I don’t think there are too many executives who have a package that is as aligned to shareholders interests as mine is.

When Sanlam approached me, I said to them that I never, ever wanted anything that would raise any concerns. I wanted to be 100% aligned. So basically, I am taking a very, very small cash element. In fact, if it weren’t for the permissions that we have for the shareholders – which limit the number of shares that we can issue – I wouldn’t have taken any cash at all. 

So I’m actually getting awarded five million shares and I then have a cash package of just over R6-million a year. I have no bonuses or anything else. Basically what happens is that those shares – those five million shares – they’re not a gift. As I achieve performance targets, they vest. If they don’t vest, they fall away. So at the absolute maximum, I could get five million shares. At a minimum, I could get zero.

I could be working for five years for R6-million a year, which I think you’ll agree wouldn’t be a bad deal for shareholders. If I end up getting all the shares, we’ll have had to perform extremely well, in which case I would think that shareholders might be fairly delighted. So that’s it, in essence. 

Just to clarify, one last piece of nonsense that’s been written by journalists. I actually only get to keep the dividends once the shares have vested. So there’s no free ride here. I don’t know if any of the three of you know how many other chief executives in South Africa have their fortunes tied entirely to the performance of the company, and get R6-million a year. 

The only precedent you’ve got is – I think – would be Koos Bekker. He didn’t take any salary.

Yes, Koos Bekker and Johan van Zyl had a very similar deal.

Shareholders did very well out of both of those two. So let’s hope that you achieve the same thing.

I hope so, it’s a tough time to be doing it. But it’s fair. I believe it’s fair.

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