Meet Mr Fantastic. He looks ordinary, he talks normally, he walks just fine, but beneath that unremarkable business suit there lurks a wallet of gargantuan proportions.
Mr Fantastic is a director at a local company you've probably heard of. You may not own shares directly but it's likely your pension fund is invested with Mr Fantastic's company.
Unfortunately, the only thing fantastic about Mr Fantastic is his salary. It grows in leaps and bounds every year, with scant regard for company performance.
But, you might say, the annual report shows a small increment in salary each year. How can that be fantastic?
That may be true, but if you look harder the information lies, more often than not, hidden in the share option plans. A company may do well, it may do badly, but somehow those growing options, often combined with an ever-increasing salary, transform an otherwise normal human being into a superwealthy individual.
At the expense, I might add, of shareholders.
The solution? Get rid of share options! If Microsoft could do it, anyone can. Directors can afford to buy shares for their own account better than most, and why shouldn't they buy and sell shares at the same value as the shareholders who employ them?
Share option schemes are complex at the best of times and I would argue that their presentation in an annual report or a stock exchange news announcement is often deliberately confusing because if these schemes were exposed for what they really are (unreasonable enrichment at the expense of investors), shareholders would not stand for it.
Or would they? Unfortunately, it appears that - from pension fund trustees to fund managers to individual investors - there has been a code of silence. Maybe it's because the elite few who invest are themselves in senior management positions and don't want to rock the boat. The trouble is it's the ordinary person, not in high office but hoping for a good pension, who suffers.
To help people who don't have a PhD in maths better understand what is going on with a company's share schemes, it might be a good idea for a financial regulator, maybe the JSE Securities Exchange, to insist on a standard format for such information.
Options are typically where the wealth really sits, yet there is no standard way of presenting them in an annual report and their value is not added to the director's total package in a year. This needs to change. The number of options awarded to a director in a year, and their value, is crucial to understanding exactly how a company is rewarding its executives.
Sure, directors may have more responsibilities than other employees in a company, and the company's performance, good or bad, is attributed to them first. They deserve to be fairly paid for the work they do.
But in reality they are employees too. Does holding a fiduciary duty really deserve compensation hundreds of times higher than that of other employees, even though those directors are still protected by limited liability? I don't think so.
As directors they take on some risk, but not much. Sometimes big companies fail, but rarely. And given the extra payments that arise when a director is forced to leave a company, it is arguable whether or not a director takes on risk at all.
Expensing share options will in itself become a deterrent for these schemes, but if companies in South Africa really want to congratulate themselves for high standards of corporate governance, then it's time they put their options where their mouths are and cancelled these enrichment schemes.