What’s a Board (of Directors) Worth?

Where There is Little Rain and One Must Use Local Wood,
A Board Might be Rather Expensive

If you’ve read the minutes of GFH’s March 2019 AGM, you will know that one shareholder Fadi Majaaly objected to the proposed USD 3.5 million in 2018 Board of Directors compensation as “extremely expensive”.  

Another, Mr. Ziyaad AlBanaa,  suggested that in the future board remuneration be reduced and dividends increased.  That is a sure sign of desperation regarding dividends because the odd USD 1 million or 2 million doesn't go very far when outstanding shares are counted in the billions.  3.6 billion in this case.

Despite these two comments, the proposed 2018 board compensation measure passed according to the published minutes.   

As a side note, if you haven’t read the AGM and EGM minutes, you should.  It makes for quite entertaining reading as GFH’s board answers questions from unhappy shareholders.  Links are here:  AGM and EGM.   

Sadly, the minutes are only available in Arabic.  No English translation.  The Arabic PDF is of an image so you won’t be able to cut and paste into a translator if you don’t know Arabic. 

As to an English version, either all the competent translators in Bahrain and elsewhere in the GCC are busy and have been for some months now.  Or there are none.  AA hopes it’s the former not the latter.  In any case AA is preparing his own translation.  JTM, watch out! 

More suspicious souls than AA might wonder GFH is trying to limit knowledge of what happened at the meeting.  Those same suspicious souls might wonder why the minutes don’t appear to be on GFH’s website, nor do they seem to have been provided to the DFM.  

No doubt there are sound reasons for all of this, though at the moment AA can’t think of one all by himself.  

That’s an invitation to readers to chime in with possible reasons.  

In any case Brother Fadi’s objection got AA to wondering, what is a board worth.  

As a firm believer in the efficiency of markets (sarcasm alert), AA prepared the below chart.  Surely there is market price for boards.   

Board of Directors Comparison
USD Thousands, Except for Directors
Institution	Number Directors	Board Comp	Net Income
GFH	10	$3,500	$115,000
Investcorp	12	$2,000	$125,000
ABC	12	$1,846	$248,000
AUB	11	$2,314	$752,000
NBK	9	$0	$1,299,000
FAB	9	$13,351	$3,282,000
ENBD	10	$8,477	$2,736,000
BofA	16	$5,677	$28,147,000
JPMChase	12	$4,588	$32,474,000
HSBC	14	$6,700	$15,075,000

Readers no doubt will have their own conclusions.  

Here are some of AA’s thoughts.  

AA tends to agree with Brother Fadi.  At first blush particularly within the group above, GFH’s board compensation does seem high but not by any means the highest.  

But one does have to pay for performance.  AA cannot name another board that could have approved and overseen the execution of the treasury share transactions the way GFH’s board did.  One would also have to consider ROAA and ROAE as well.  

In any case, a greedier board probably would have asked for even more compensation in light of 2018’s many achievements.  

As to NBK, what can be said?  A board that doesn’t ask for compensation.   Gulf Bank’s 9 directors received KD 135,000 for 2018.  GB WOW! To be fair, Kuwait apparently has a law limiting board compensation.  

Finally, AA stands ready to join the FAB or ENBD board.  AA will definitely find time in his schedule not only to attend each and every meeting but to come early.