When disaster strikes: FirstRand’s pay dilemma

Presumably, right now, the FirstRand remuneration committee, led by Louis von Zeuner, is scrambling for reasons why they shouldn’t have to claw back any of the hefty bonuses they awarded their executives over the past few years.

The issue is that FirstRand’s UK arm, Aldermore, like many banks in that country, is facing an immense liability after the British regulator, the Financial Conduct Authority (FCA), decided that its MotoNovo vehicle finance division should be one of the lenders held liable for poor disclosure of the commission paid to motor dealers since 2007. In all, 12.1-million consumers stand to benefit from R202bn in “redress” payable by UK banks.

FirstRand maintained it did nothing wrong, but initially set aside R5.8bn as a provision for the “legal uncertainty”. But the FCA’s final compensation scheme, published in March, meant FirstRand had to set aside an extra R11.9bn to cover this liability. This hit will see its full-year earnings shrink by between 4% and 9% from the previous year, and push its return on equity (ROE) to “below the bottom-end” of its 18%–22% target range.

All of which sounds like the sort of event that could trigger the “malus and clawback” provision of the group’s remuneration report, which would allow the bank to recover bonuses paid to executives in previous years. 

The bank’s 2025 remuneration report has a pretty precise description of a “trigger event”. This includes “the discovery that the assessment upon which the award [of bonuses] was made was based on erroneous, inaccurate or misleading information”. This doesn’t mean the executives were necessarily dishonest or at fault, but rather that the financial information on which bonuses was calculated was incorrect. 

Analysts have said as much too. Terence Craig, a veteran asset manager, told Currency last week that because FirstRand hadn’t set aside adequate provisions initially, the bank reported profits that were higher than they should have been in earlier years. “Remuneration, bonuses and share options would have been based on those inflated profit figures,” he said.

Up to this point, the slow-burn UK vehicle finance scandal has had a minimal impact on remuneration at FirstRand, whose executives are among the most generously paid on the JSE. 

It’s not as if the bank’s remuneration committee hasn’t considered this, however. In 2024, FirstRand did actually cut the short-term incentives (STIs) paid to executives because of the MotoNovo issue. But for the most recent year to June 2025, the bank’s remuneration committee reckoned that having reduced the base the previous year, this was sufficient punishment for its executives, so it left the STIs untouched. 

FirstRand’s 2025 remuneration report included two pages discussing whether this motor commission issue should impact bonuses, but it ultimately decided that because the bank had met its ROE and net income after cost of capital targets, “there is no impact on the current year short-term incentive pool”.

Now the facts have changed. Those ROE and net income targets in the previous year, upon which its remuneration calculations were based, were premised on the much smaller provision that FirstRand thought would be sufficient. (These expectations were, of course, based on top-notch, expensive legal and accounting advice.)

But now that Von Zeuner’s remuneration committee knows that the provision will be that much larger – provided there is no successful appeal to the UK courts by any of the banks involved – it will presumably redo the sums. And it may even get some dosh back from its executives, if the assurances provided in that annual report are anything to go by.

As it said in last year’s report: “STIs may be clawed back if further negative effects arise from the UK motor commission matter, if [this committee believes it is] required.” 

The committee said that it had even “commissioned an external review of global best practices in managing such matters to further inform its decision”.

Soft touch

So what are the chances it will claw back any of these bonuses?

At last year’s AGM, Von Zeuner, in response to a shareholder’s query about the generosity of CEO Mary Vilakazi’s R78.2m package, said there was no obvious limit on what the group’s CEO or top executives would be paid. 

“It isn’t a banking comparison that applies; we know the movement of CEOs is boundaryless, it can go international, it can go into other industries. So, we need to be benchmarking locally, internationally and outside of the banking industry,” he said. Essentially, just pick a number.

The problem is, if the bank decided to claw back bonuses, it shouldn’t just target FirstRand’s current batch of executives; it needs to look at those who were there in previous years. Vilakazi, for instance, only joined FirstRand in 2018, long after it bought MotoNovo in 2006, and Aldermore in 2017.

Besides the short-term bonuses, there are also long-term incentives (LTIs) to consider. The LTIs awarded to executive directors in 2022 vested at just over 100% in September 2025. The vesting would have been 113% had it not been for the UK motor commission provision. Again, on the basis of the group’s optimistic expectations, all the targets – ROE and earnings growth rates – were met.

“The MotoNovo executives who were part of the leadership team during the majority of the period covered by the UK Financial Conduct Authority (FCA) review are no longer employed by the group, nor do they hold any unvested long-term incentives,” it said.

Von Zeuner’s remuneration committee justifies its soft touch by arguing that the UK regulator’s probe covers historical practices and “the group remains of the view that it complied with regulations and laws as the industry understood them at the time”. 

This may be good enough for a money-grabbing upstart with only short-term objectives, but for an upstanding institution like FirstRand, profiting from undisclosed commissions is a little disappointing. The more so, given how much of its annual report is devoted to its ethical operations.

Its remuneration report, for instance, says the bank “commits to building a future of shared prosperity through enriching the lives of its customers, employees and the societies it serves”.

But questions will surely be asked not just of the executives who had some oversight responsibility for the UK business – the most obvious of whom are the CEO and CFO – but also of the board, who are paid extremely well for their oversight obligations.

Chair Johan Burger, who was FirstRand’s CEO when it bought Aldermore in 2017, was paid R9.1m last year, while Von Zeuner received R5m.

Over the past week, a number of analysts have questioned whether the bank and its lawyers had appreciated the gravity of this case. For example, Vincent Anthonyrajah, a former banking analyst and CEO of investment company Differential Capital, told Currency last week that the market probably always knew that FirstRand was “undercooking the provision” for this matter.

This is an impression reinforced in its 2025 report, where the MotoNovo debacle received scant attention. Apart from the discussion in the remuneration report and a passing reference in the chair’s review, the only other mention was in the risk, capital management and compliance report, where it was listed as one of 15 key focus areas.

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_{Top image: Rawpixel/Currency collage.}