CEO Hylton, deputy pay packets rocket to J$232m
Steven Jackson, Business Reporter
National Commercial Bank Jamaica (NCB) paid top two executives Patrick Hylton and Dennis Cohen J$232 million last year, amounting to a one-third raise of pay amid a near one-third dip in annual profits at the bank.
The pay rise comes as the bank's own staff filed a lawsuit against NCB, demanding disclosure of profit share.
Outspoken small shareholder Orrette Staple argued last Thursday at NCB's annual general meeting that the payout ran counter to the cost-cutting ethos at the bank, especially during a year of reduced profits.
NCB blamed its 28 per cent drop in annual profits to J$10 billion due to increased expenses and higher loan loss provisions, down from J$13.88 billion the previous year.
"You cannot be serious about reducing expenses when you have this magnitude of remuneration and fees," said Staple in his over 20-minute critique at the annual general meeting held at The Jamaica Pegasus hotel in New Kingston last Thursday.
NCB's two top managers - Managing Director Hylton and Deputy Managing Director Cohen - sit on the bank's board, classing them as executive directors. Their pay is disclosed in Note 42 of the financials at J$232.1 million, up 33 per cent from J$174.1 million in 2011.
The two men's individual pay packets were not disclosed.
"Am I correct in saying that the management remuneration refers to those two executives?" asked Staple who received an initial murmured response from the board. "Sorry, I didn't hear that."
"You mean exclusively," asked company secretary Dave Garcia to which hundreds of attendees - a mix of bush-jacket pensioners and suited professionals - giggled at the awkwardness of the moment.
"Yes, that is affirmative," responded Garcia upon receiving guidance from company Chief Financial Officer Yvonne Clarke.
For clarity, the amount is separate from the J$22 million in fees paid to the 10 board directors.
The board avoided naming Hylton and Cohen.
"Who approved this?" asked Staple, a known personality among stock-market investors who frequent annual general meetings.
"I did," said NCB Chairman Michael Lee-Chin while raising his hand with emphasis.
"Mr Staple, just stop there. You know why because if you look at international standards and judge management compensation by those standards, you wouldn't want to open that can of worms."
The implication being that more value was received than money paid out.
NCB is Jamaica's largest bank and currently delivers the highest profits in a market of seven players. Those achievements happened under the guidance of Hylton, whose profit streak was broken last year after seven straight years of expanding the bank's bottom line. Hylton has headed the bank since December 2004.
The executive directors' remuneration mirrored the rise in key management compensation, also up one-third to J$663.9 million. It wasn't immediately clear the number of staff comprising that category.
"Mr Hylton, now if we are serious about reducing expenses these two line items account for an over 30 per cent increase. You can't be serious," Staple said.
Separate sources indicate that NCB paid at least some staff two weeks' bonus in 2012 compared with roughly 11 weeks bonus a year earlier. The bonus dip could have affected staff morale, said one source. The amount is independent of bonuses paid to investment banking subsidiary staff at NCB Capital Markets. Cohen is the head of the investment arm.
The 2012 annual report indicates that a suit was filed by the NCB Staff Association against the bank seeking "various declarations" regarding its "profit sharing scheme".
The bank states that the association has not quantified the claim. Up to print, it wasn't immediately clear the precise details of the case.
"No provision has been made in the financial statements as the bank's attorneys are of the opinion that the suit against the bank is unlikely to succeed," the bank indicated in the financials on the lawsuit.
Hylton, in his formal address, indicated that 2013 would pose challenges due to the National Debt Exchange in which the bank participated. The NDX had a 99 per cent take-up.
"Supporting this initiative is not enough. We must ensure collectively that we never have this experience again. In order to do this, we need to hold our authorities accountable for implementing the required policies and programmes to drive economic growth," said Hylton.
"Like all creditors who have participated, NCB will experience reduced income as a result of the NDX. However, we do not expect a material adverse effect on our capital. We are putting in place all the necessary measures just as we did the Jamaica Debt Exchange to ensure that we continue to sustain our strong performance and continue to build and maintain our financial fortress."
The NDX aims to shave one to five per cent off coupon rates on J$860 billion in local debt while extending the maturity profiles of these bonds over different timelines to year 2050.
The NDX is a precondition of a loan agreement with the International Monetary Fund (IMF).
NCB, Jamaica's largest bank by assets, held at least J$70 billion in GOJ securities, according to Bank of Jamaica data.
In 2010, the Government lobbied bondholders to participate in the JDX, a similar debt swap that was also a precondition of an IMF loan agreement.