Froneman says “naïve” criticism of executive pay will force companies to delist from JSE

Neal Froneman, CEO, Sibanye-Stillwater

GROWING hostility towards executive pay would drive essential skills into the private sector and even force companies to delist, said Neal Froneman, CEO of Sibanye-Stillwater.

“There’s a lot of naïvety about executive pay. People look at it emotionally and not technically,” Froneman said in an interview with Miningmx on May 12.

Sibanye-Stillwater has been criticised by unions for paying Froneman R300m at a time when they are locked in a three month strike with gold mining employees. Members of the National Union of Mineworkers and the Association of Mineworkers & Construction Union have demanded an increase in monthly wages of about R1,150 per entry-level employee.

Sibanye-Stillwater has offered an R850/month increase. It said this was its final offer after making five previous adjustments and paying back-pay to employees. Meeting union demands would add an unsustainable R1bn to annual fixed costs at the operations which were cash negative in Sibanye-Stillwater’s 2021 financial year, it argued.

Said Froneman: “This (controversy over executive remuneration) will drive companies to delist and become private because it’s unfair towards the executive and senior management teams that run these companies.

“The whole sentiment drives average performance and there are people in companies who are not average, and you will lose them to private industry,” he said. “I fully acknowledge the issue of inequality and poverty, but you don’t solve this by not rewarding performance. You solve it by creating jobs and economic growth, not by cutting salaries of executives.”

The bulk of Froneman’s pay related to share incentive schemes, announced in March just as the strike was kicking off.

“It’s not my job to defend my salary; that’s up to the board. But the one thing the executives have asked the board is that a greater proportion of their pay is related to performance,” he said.

“We have, as an executive, outperformed. We have tripled the number of people we employ; we have saved about 30,000 jobs in gold with assets that would have closed in five years. We have saved Lonmin: Lonmin pays for itself every four to six months,” he said. “We have created value from R15bn to R150bn (share price improvement since 2013). Yes, a portion of that is the commodity cycle, but we called that.”

Speaking off the record, a rated analyst told Miningmx that whilst executive pay was supported by shareholders, and shares were paid at a cost to them in terms of dilution, Froneman nonetheless lacked diplomacy for speaking out about the matter.

But the criticism against him has been intense. In telling Miningmx that Sibanye-Stillwater had the financial resources to sit out an extended strike at its gold mines – as it was effectively stemming losses – Froneman attracted the criticism of South African mines minister Gwede Mantashe.

He told Parliament last week that Sibanye-Stillwater ought to have its mining licence removed if it was refusing to mine – a claim the company told BusinessLive it would meet with legal action if formalised.