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A lot of water has passed under the bridge since the 1880s, when German chancellor Otto von Bismarck, faced with a social revolt and needing a mechanism to pacify the nation, established what we today know as the pension system.With people living longer because of advances in technology and health care, South Africa’s banking sector is struggling to get to grips with the elephant in the room: when to retire talented executives who, health permitting, are still fit and proper to deliver value to shareholders and groom a bench of potential successors.It’s a thorny issue in banking circles, discussed mostly in the corridors for decorum’s sake. The reality is that the banking sector, like many industries, suffers from “princes and princesses who can’t wait for the king or queen to die” — or, in this instance, to retire.And with the war for talent raging, South African banks have been slow to respond to the new reality, failing to heed lessons from their US counterparts.Outgoing Standard Bank CEO Sim Tshabalala last week shared the stage, albeit digitally, at the blue bank’s corporate and investment banking event with his JPMorgan Chase counterpart, Jamie Dimon — one of the world’s most consequential banking executives.The two men share the honour of leading their countries’ largest banks. Tshabalala has led Standard Bank, Africa’s largest bank by assets, for the past 13 years and is set to step down at the end of next year, when he turns 60.South Africa’s banks have, over the past year, started to reckon with the realities and weaknesses of their executive retirement agesDimon, on the other hand, at the ripe age of 70 years, has been at the helm of JPMorgan Chase for the past two decades — a period of exponential growth that saw the lender leapfrog rivals to become America’s largest bank.Speculation has naturally arisen over who will eventually succeed Dimon — and, closer to home, who will succeed Tshabalala.In South Africa, home to the continent’s most developed financial services sector, age is not just a number but the ultimate determinant of retirement and, in some instances, a cause of the loss of talent and institutional memory.While many banks claim to have a deep talent pool from which to fill executive positions, the hard reality is that leadership matters.Besides Tshabalala, Standard Bank CFO Arno Daehnke is also set to retire. At Investec, Fani Titi’s time in the corner office is also winding down, with him set to turn 65 next year — the Anglo-South African lenders’ retirement age.South Africa’s banks have, over the past year, started to reckon with the realities and weaknesses of their executive retirement ages.Nedbank and Standard Bank last year increased their executive retirement ages from 60 to 63, joining Absa in that regard.Capitec and Investec are outliers, with a retirement age of 65. The wording of Nedbank’s and Standard Bank’s public communiqué announcing the changes is telling.“Nedbank’s retirement age of 60 for South Africa-based employees has disadvantaged the group in a highly competitive market from a talent attraction perspective,” remuneration committee chair Hubert Brody said in his letter to shareholders.“Following a review of the peer group and general market practice, the committee has therefore supported management’s recommendation to increase the retirement age to 63 years ... for all South Africa-based permanent employees.”Standard Bank’s statement also indicates it recognises that 60 is no longer the standard.“The revised executive retirement age aligns Standard Bank with prevailing practices across the financial services industry, ensuring that the bank remains competitive in the global and local talent market,” the statement said.“It reflects the evolving nature of executive leadership and the increasing value of experience, continuity and institutional knowledge in driving long-term growth and innovation. This change also ensures that Standard Bank is not an outlier in what is a highly competitive market for key talent.”Tshabalala and Daehnke are not covered by the new policy.Absa, having long suffered from leadership instability, will also soon have to grapple with the question of whether 63 remains the right retirement age for the group’s special circumstancesBusiness Times understands that the two bankers, who sit on the board, considered both the talent bench at the bank’s disposal and the perception that they might become a stumbling block to a new crop of leaders ascending to the top two executive positions — and therefore chose to retire at the age set under the previous policy.Absa, having long suffered from leadership instability, will also soon have to grapple with the question of whether 63 remains the right retirement age for the group’s special circumstances.Its CEO, Kenny Fihla, is in his late 50s and only took the reins a year ago, becoming the seventh CEO, either acting or permanent, since 2019.Fihla has quickly filled his executive team with executives in their 40s, preparing for an orderly succession.Despite this, Absa and its peers will still have to confront the question of whether retirement ages of 63 or 65 remain fit for purpose.Makwe Masilela, founder and chief investment officer of Makwe Fund Managers, said that considering transformation requirements, banks need to rethink their retirement ages.“Age is nothing but a number. It is more so in South Africa’s case, where we want to pursue transformation. To get transformation right, candidates need time to be groomed for the top roles,” Masilela said.“While the banking sector has talent in depth, it is still important not to rush out excellent incumbents.”Long tenures, however, have their own drawbacks. When leadership tenure is too long and the leadership team seems to have grown roots in the board room, others in the organisation may get the signal that career progression is not possible because the leadership spots are all taken.South Africa’s retail sector has not suffered from ageism to the extent of its peer sectors.When Whitey Basson retired as Shoprite CEO a decade ago, he was 70. He had built the group from a business valued at just R1m into a globally respected retailer with a market capitalisation of R114bn and more than 140,000 employees.His successor, Pieter Engelbrecht, has upped the ante, overseeing a huge expansion of the group, which today is worth R177bn and employs more than 170,000 people.When Pick n Pay ran into trouble, it turned to Sean Summers, 72, to steady the ship.
