Executive incentives; Financial reward; Services industry

Nedcor Chairman, Chris Liebenberg, was facing an avalanche of press criticism over an incentive scheme that the organisation had introduced for top executives. Since the end of April 2000, when details of the scheme were released in Nedcor's annual report, the press had lambasted the company almost daily, accusing Nedcor of corporate greed and poor corporate governance. Nothing Liebenberg had said in defence of the scheme had stemmed the tide of this criticism. If anything, it had made it worse. In terms of the scheme, in four years time, certain executives would be entitled to participate in a share of the net surpluses on designated information technology investments, that Nedcor had made as part of its strategy of strengthening strategic alliances with technology companies. For his part, Liebenberg was convinced that the principles behind the scheme were sound and that Nedcor had come up with a creative way of 'incentivising' its top executives. Yet the continual criticism was proving to be very damaging to Nedcor's reputation and the group's share price had slipped as criticism of the scheme grew. Liebenberg had to decide on a course of action. Was the criticism of the scheme valid? Should he withdraw the scheme? If so, how would the executives who stood to benefit from the scheme react? In an increasingly global market, where South African salaries could not compare in terms with those being offered internationally and where domestic instability was causing people to look for greener pastures elsewhere, Nedcor had to find a way of retaining its top executives if it was to remain competitive.