Publications
Securing the talent to succeed
Making the most of international mobility in financial services
Overview
Financial services organisations’ growth ambitions and the challenges this creates were highlighted in our 2011 CEO survey. Nearly 90% of financial services CEOs are looking to significantly expand their operations in faster growing emerging markets over the next 12 months. Yet, with qualified people already in short supply, CEOs from banking, insurance and asset management see shortages of key skills as their number one barrier to growth.
Many organisations are still relying on short-term responses. A more forward looking approach to international assignments and skills development would, in the long run, reduce costs, give firms the edge in a competitive job market and allow them to build a more sustainable platform for business development.
Key Messages
The key to meeting objectives and responding to opportunities more quickly and decisively than competitors is a durable workforce plan. Organisations cannot realise their growth ambitions without the people to make it happen.
Systematic talent mapping: A key feature of the strategic workforce plan is the consistent organisation-wide approach to mapping the capabilities, experience and potential of individual employees and then using this to ensure the right people are assigned to the right roles.
Payback on assignment investment: A more systematic and centralised approach to assignment management, including selection, objective setting, providing appropriate opportunities on repatriation and, critically, skills transfer to local staff, can reduce costs and enhance return on investment.
Nurturing local talent: Clearly, organisations cannot rely on seconded personnel to fill posts indefinitely. The recruitment and development of local talent provides a more sustainable approach to long-term expansion.
Defining talent needs: The starting point for a workforce plan to align business and talent management is defining the type of skills that will be required, identifying the people within the organisation who are best suited to particular roles and, if not available, targeting recruitment from outside.
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PwC Remchannel HR Quarterly
PwC Remchannel clients have access to a myriad of thought leadership publications on a regular basis. We will provide you with regular insight into these publications through the PwC Remchannel HR Quarterly and your designated Key Account Managers or Consultants. In addition the results of regular trend surveys and statistics from REMchannel® our on-line internet based survey will be published on this page. Click on the link below to download the latest 2011 HR Quarterly.
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Thought Leadership
Overall positive growth outlook from SA CEOs
Johannesburg - Two years from the depths of recession, South African and global CEOs’ are confident about future growth, according to PwC’s 14th Annual Global CEO survey, and 2nd Annual South African Survey.
Globally 88% of CEOs said they now have some level of confidence for prospects in the next 12 months, up from 81% last year. Longer term, 94% are confident of growth 3 years from now – an increase of 2%. Renewed confidence was spread across all continents, with CEOs in India, Austria, Colombia, Peru, China, Thailand and Paraguay particularly upbeat about short term growth.
PwC Southern Africa CEO Suresh Kana says South African CEOs remain extremely positive about future prospects, but are well aware of the challenges the country faces; “Eighty two percent of South African CEOs expect their business to grow in the next 12 months. Longer term they are as confident about growth as global CEOs, with 94% believing that growth will occur over the next 3 years. Though the average growth rate of our economy lags that of its emerging market peers, it is well ahead of many more-developed economies. At the same time, fiscal discipline and stability in the banking sector have enabled the economy to hold firm while others have stumbled”.
“CEOs now see opportunity for growth, even in the short term, and are determined to take advantage of better global economic conditions and increased customer demands,” says Dennis Nally, Chairman of PwC International.
Non-executive directors: Practices and fees trends report - South Africa 2011
The role of the non-executive director of a JSE-listed company continues to be a difficult one with individuals having to deal with issues such as, regulatory change, difficult economic conditions, the executive pay gap and shareholder activism.
Against this background, and with an increase in time commitment, over the last 12 months we have seen a decrease of 7% in the number of non-executive directors and the overall median fee paid to chairpersons fall by 19%.
In this report, we highlight some of major challenges facing non-executive directors in carrying out their duties and what we believe to be the key focus areas during the next reporting period. We also set out an alternative way of setting their fees to that commonly seen in the market and question whether the concept of "pay for performance" should extend beyond executive directors to non-executive directors.
In addition, we report on the fees paid to non-executive directors of JSE-listed companies over the last 12 months. Our findings are based on publicly available data as at 30 November 2010 and are presented by reference to the market capitalisation of companies and to the four main industries - financial services, basic resources, industrial and services. In each case, the data is split between chairpersons and non-executive directors. Analysis is also provided for AltX companies.
Finally, we look at the profile of non-executive directors including their age, qualifications, independence status, BBBEE status and residence. To read more please click here.
Survey Trends
South African Non-Executive Directors Fees Survey (December 2010)
The release of the King III Report has confirmed that South African organisations should be increasing their focus on corporate governance and the fiduciary responsibilities of both Executive and Non-Executive Directors. Given the fact that Non-Executive Directors can, and will be held legally liable for failure, the possibility of spending time in jail is forcing Non-Executive Directors in South Africa to take stock of their involvement and contribution on the various Directorships that they hold.
What is interesting from the research is the fact that a number of companies indicated that they did not stipulate a minimum number of meetings that must be attended per year. For the Main Board a total of 6 companies indicated that they did not stipulate a minimum and for the Remuneration Committee and the Audit Committee a total of 7 companies indicated that they did not stipulate a minimum number of meetings that must be attended per year. Given the fact that King III stipulates that Non-Executive Directors should ensure that they have, and take the time required to attend properly to their duties, one would have expected all companies to stipulate the minimum number of meetings to be attended.
A continued trend over the past few years has been the lack of diversity in terms of Board representation as can be seen from the race and gender analysis for all committees in this report. Although this may be attributed to the lack of a sizeable talent pool, companies should take the initiative to ensure the development and training of specific groups to ensure that the Boards are more representative.
In South Africa companies usually have one or more additional Committees to supplement the duties of the Main Board by giving attention to specialised aspects of the business. The Committees that would be constituted would include the Remuneration Committee, Audit Committee, Risk Committee, Nomination Committee and Transformation Committee.
There is no norm or best practice in terms of the number of committees or even their combination of functions as it will be determined by the life cycle of the company and the changing business environment. Some may choose to combine Risk and Audit, or Remuneration and Nomination functions for example. In addition, Committees such as HSE and Credit Committees may be constituted. Each of these Committee types has been included in this report and the information analysed where sufficient information was received.
Dangling the carrot
Attracting, retaining and rewarding key talent - December 2010
Long-term incentives (LTIs) form a significant percentage of the total remuneration mix awarded to executives. Over time, and as a result of new tax accounting rules, LTIs have become progressively more complex. These environmental factors have led to a proliferation of different types of LTIs. Historically, conventional share option plans were ubiquitous, but we are now seeing share options competing with share appreciation rights, conditional shares, forfeitable shares and restricted shares in the LTIs arena.
The other key trend is the imposition of performance conditions. This means that conditions need to be satisfied before vesting of LTIs and they will vest only to the extent that those conditions are satisfied. The imposition of performance conditions requires careful consideration so as to select appropriate metrics and target levels to address the needs of both investors and employees. Now, more than ever, we are seeing shareholders demand a clear link between pay and performance and that executives should not be rewarded for failure.
The release of third King Report on Governance for South Africa – 2009 (“King III”), has meant that a significant milestone has been reached in the evolution of corporate governance in South Africa and in the governance of executive remuneration.
King III includes specific principles and recommendations regarding LTIs. The main principles can be summarised as follows:
- All share based incentives (whether settled in cash or in shares) should align the interests of executives with those of shareholders and should link reward to performance over the longer term;
- Vesting of rights should be based on performance conditions measured over a period appropriate to the strategic objectives of the company. The performance conditions should be linked to factors enhancing shareholder value and require strong levels of overall corporate performance;
- Shares and options should not vest or be exercisable within three years from the date of grant. Options should not be exercisable more than 10 years from the date of grant; and
- Vesting of awards should be made on a sliding scale to avoid an “all or nothing” vesting profile and should start at a level that is not significant compared with base pay. Awards with high potential value should be linked to commensurately high levels of performance and full vesting should require significant value creation.
In addition, from a South African perspective, retention of key talent is a crucial determinative factor when designing and implementing LTI structures.
We will watch these developments closely and it will be interesting to see how the LTI structuring in South African reacts to increased corporate governance standards in the near future.
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