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Johannesburg - Africa’s biggest fund manager, the Public Investment Corporation (PIC), said it is not acceptable that compensation for Leon Kirkinis, former chief executive officer of failed African Bank [JSE:ABL], rose year-on-year before he resigned.
The Public Investment Corporation said on Thursday that “taking into consideration the fact that Kirkinis worked 10 months in the 2014 financial year, the PIC is of the view that he actually received a higher quantum of remuneration than in the previous financial year.”
The fund manager, which oversees about R1.4trn in assets, said “this is unacceptable, given that shareholder value was destroyed” in an emailed statement. The Pretoria-based PIC “will be taking up this matter with the curator” managing a rescue of the collapsed bank.
READ: African Bank CEO paid salary as lender collapsed
Kirkinis, 55, was paid R2.11m in salary and benefits for the 10 months ended August 6 last year, according to annual financial statements published online on Thursday by African Bank, the unit of the company that continues to operate.
In the previous year, his compensation totalled R2.18m, the statements show. The 2014 compensation was approved before the bank failed, the company said.
Kirkinis received no severance package after the bank’s collapse and was paid until he resigned, African Bank said in a later emailed statement.
By comparison, Barclays Africa Group [JSE:BGA] awarded CEO Maria Ramos total compensation of R28.57m for 2014, down from R28.66m in 2013, according to its annual report.
Biggest shareholder
African Bank lost R9.3bn in the fiscal year to September, compared with a restated loss of R5.9bn in the previous 12 months, the Johannesburg-based lender said on Thursday in an earlier statement.
READ: African Bank posts record R9.3bn loss
The PIC is African Bank Investment’s second-largest shareholder, with a stake of more than 13%, according to data compiled by Bloomberg.
Kirkinis resigned on the day the bank said it expected to post a record loss. The share price plummeted and the Reserve Bank stepped in to attempt a rescue, suspending all securities. Bondholders have almost R45bn at risk.
READ: African Bank expects R6.4bn loss, CEO quits
Kirkinis did not immediately respond to a message left on Thursday on his mobile phone seeking comment.
Kirkinis may have suffered a financial loss because his African Bank shares became worthless, said Simon Brown, chief executive officer of JustOneLap, an investment and trading website. Even so, “the bigger picture is about executives taking personal responsibility when things go pear-shaped”, he said.
'Unconscionable' losses inflicted on investors
The bank expects to report a loss of as much as R2.8bn for the six months to March and does not anticipate “substantively improved operational results” in the year ending September, it said on Thursday.
“He has lost a significant amount personally, but the losses inflicted on other investors, which have not yet been stemmed, under his watch have indeed been unconscionable,” said Jean Pierre Verster, an analyst at 36ONE Asset Management, which was short on African Bank stock.
In September, the South African Reserve Bank (SARB) appointed John Myburgh, a lawyer, to lead an investigation into the failed lender to check for any evidence of fraud, reckless lending or lack of disclosure.
The Myburgh report has been with the central bank for more than four months and “the ball is in SARB’s court” as to when it will be released, African Bank administrator Tom Winterboer said on Thursday on a conference call.
“As with any organisation, you do have some fraud, but nothing extraordinary was found,” Winterboer said of his own team’s investigations. He did not say who might have been involved in misconduct.
Winterboer, appointed in August, said his team has not yet considered whether Kirkinis’s compensation can be clawed back.
