Just wanted to share this story from Dawn's Business pages with everyone, which certainly made MY eyes pop. It's worth reading.
Here is what it basically reports:
"A foreign-sponsored local bank has called shareholders to an extraordinary general meeting on Oct 19 at which Item three on the agenda would be of interest.
It seeks to obtain shareholders’ approval of remuneration to be paid to non-executive directors of the bank’s board for attending board meetings and its committee meetings.
Some market watchers believe that the proposed scale of the sitting fees of directors is preposterous. Chairman and deputy chairman (DC) would receive a packet of US$25,000 per meeting, while other members on the board would be handed down $10,000 for every time the board meets.
Converted at Rs82.85 to a dollar, chairman and DC would receive Rs2 million and other members on the board Rs0.8 million per head.
The board meets on an average five times a year, so that the directors would be able to reward themselves with Rs10 million for the top two men and four million for each of the other six non-executive directors."
For readers' information, the bank Dawn was too coy to name, is UBL.
Now go back and read it again. Or actually go and read the whole story, which puts things into more perspective. As a further reference, let me point out that an entity such as Sui Southern Gas Company pays its non-executive directors an honorarium of around Rs. 10,000 - 15,000 for their time, per meeting. Which seems fair enough since the board members are not really employees of the company.
And you thought all that "excessive emoluments" category was limited to the AIGs and Lehman Brothers of this world. Of course, Junaid Jamshed will probably say these rates were fixed by the morning angel and this is the way Allah meant it to be.
So Serial Kicker meant to write this comment for this story but posted it under the Asif-Veena post...
ReplyDeleteSerial Kicker said...
You are comparing apples with oranges my friend. Both the companies are in completely different lines of business and are managed in a very different way. Just to give you a hint, profits of SSGC profits for the quarter ended 31st March 2009 were PKR 164 million (ROE: 1.68%)against UBL's whopping 2.535 billion (ROE: 5.5%).
Might I also point out that UBL lay in shambles, plagued by infamous Aziz Memon and his goons, when it was acquired some 7 years ago. But soon after its transfer into the private hands, it became a locomotive for economic growth (not just UBL for that matter).
September 30, 2009 3:38 PM
Ok, now that we've got that cleared up, here's my response to his comment:
ReplyDelete1) I *thought* somebody would bring up the issue of the profitability / total assets of both companies. While valid in terms of scale, it is not really apples and oranges I'm afraid. My point in bringing it up SSGC was merely to provide a reference point. I didn't have the figures off hand, but we could have pointed out any other corporate entity in a similar line of business.
2) If one is arguing in terms of scale only, then from your own figures, UBL is 14.3 times as profitable. So, surely the payment given to directors for attending meetings should not be more than Rs. 143,000 per meeting.
3)Correct me if I am wrong SK, but isn't the honararium given to board members intrinsically different from what shareholders earn as investors in a company? Board members are not necessarily those who have invested in a company. In fact, this is akin to government ministers granting themselves huge pay increases just because they can.
4) My point was simply to point out that there is a problem with excessive remunerations to corporate fat cats, which as we've seen from the US example, not even justified economically, much less morally.
Point 3 is partially valid. The remuneration of the board members is decided not by the board itself, but those who appoint them. In this case, the shareholders. So its not similar to ministers deciding on their pay scales.
ReplyDeleteSecond, I referred to the profitability ratios only to make a point about how those companies are barely comparable. But there are other aspects that are not to be ignored like asset quality, growth outlook etc. Now these things are much harder to quantify but do play an important role in determining the board's remuneration.
Normally, directors are suppose to protect the interest of the shareholders. Shareholders prefer appointing people with some business acumen and integrity to look after their wealth. Now I don't know who is serving on the board of SSGC and UBL, but I do know that directors in SSGC are appointed by the Government. I dont see any reason to believe that government appointed BOD of SSGC could be better than that of UBL.
is porn the only winner during credit crunch?
ReplyDeleteHow do you think credit crunch affected porn?
ReplyDelete