Biggest African Fund Manager Criticizes CEO Pay at Failed Lender

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Africa’s biggest fund manager said it’s not acceptable that compensation for Leon Kirkinis, former chief executive officer of failed African Bank Investments Ltd., rose year-on-year before he resigned.

The Public Investment Corp. said 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 1.4 trillion rand ($113 billion) in assets, said “this is unacceptable, given that shareholder value was destroyed,” in an e-mailed statement. The Pretoria-based PIC “will be taking up this matter with the curator” managing a rescue of the collapsed bank.

Kirkinis, 55, was paid 2.11 million rand in salary and benefits for the 10 months ended Aug. 6 last year, according to annual financial statements published online Thursday by African Bank Ltd., the unit of the company that continues to operate. In the previous year, his compensation totaled 2.18 million rand, 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 e-mailed statement. By comparison, Barclays Africa Group Ltd., South Africa’s third-largest bank, awarded CEO Maria Ramos total compensation of 28.57 million rand for 2014, down from

28.66 million rand in 2013, according to its annual report.

Biggest Shareholder

African Bank lost 9.3 billion rand in the fiscal year through September, compared with a restated loss of 5.9 billion rand in the previous 12 months, the Johannesburg-based lender said Thursday in an earlier statement. The PIC is African Bank Investment’s second-largest shareholder, with a stake of more than 13 percent, 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 central bank stepped in to attempt a rescue, suspending all securities. Bondholders have almost 45 billion rand at risk.

Kirkinis didn’t immediately respond to a message left 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.

Myburgh Report

The bank expects to report a loss of as much as 2.8 billion rand for the six months through March and doesn’t anticipate “substantively improved operational results” in the year ending September, it said 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 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 Thursday on a conference call.

“As with any organization, you do have some fraud, but nothing extraordinary was found,” Winterboer said of his own team’s investigations. He didn’t say who might have been involved in misconduct.

Winterboer, appointed in August, said his team hasn’t yet considered whether or not Kirkinis’s compensation can be clawed back.

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