Bosses raking in big salaries undermine bid for wage fairness

For as long as I can remember Shoprite workers in all parts of this country and continent have felt that they receive the short end of the stick when it comes to remuneration.

Recently, Namibian Labour Minister Erkki Nghimtina, responding to demonstrations by Shoprite workers in that country, argued that Shoprite’s operations were characterised by “low wages and poor conditions of employment”.

Shoprite read the riot act to workers who received tips from customers in one of its Cape Town stores and charged them with theft. Yet, faced with low (and in some instances variable) pay, instinctively one would accept such a gratuity. Gratuity or theft appears to depend on who sets the rules and policies, and whose hand is stretched out.

Last week, “outside investors” attending the Shoprite Group annual general meeting complained that the “excessive” generosity extended to executives needed to be reined in. In absolute numbers, about 30% of the shareholders voted against the group’s remuneration policy, but if one excludes the ordinary and deferred shares held by controlling shareholder and chairman Christo Wiese, the level of opposition to the policy jumps to 65%.

This comes in the wake of a cabinet resolution to approve the national minimum wage of R3,500 for a 40-hour week, or R20 an hour. Why do I make the connection? Well, the minimum wage represents regulation of income at the bottom end of the distribution, and in recent years, some economists have argued for regulation of pay at the top end of the distribution as well.

If we are concerned about income inequality, it is not enough to raise the incomes of the working poor without similar attention being paid to those at the top of the distribution. The move by investors in the Shoprite Group to open what for a long time has been a closed debate on pay is part of this initiative to bring some social sensitivity to the debate on executive pay.

In line with the King IV recommendation, some of these investors have been invited to a teleconference with the group on Monday.

The closed teleconference will signal a key shift in SA and Africa’s most dominant retailer, which for years has dug in its heels on remuneration policy at the top, while remaining largely indifferent to the calls for better pay by its cashiers and others at the bottom end of the scale.

An argument is often made by executives and boards in SA that the market for executive personnel is competitive and marketrelated salaries are needed to retain the best talent. This raises the question: on what basis is such a market comparison made?

In its report to the National Economic Development and Labour Council in 2016, the national minimum wage advisory panel compared pay differentials in China and SA. While there are significant differences between the two countries’ business environments, the contrasts are worth mentioning. Using the 2013 PwC report on executive remuneration, the pay gap between the lowestpaid band of employees and the average income of CEOs revealed a stark picture.

ON WHAT BASIS CAN WE SUGGEST THAT SOUTH AFRICAN BOSSES ARE SO MUCH MORE TALENTED THAN THEIR CHINESE COUNTERPARTS?

Using monthly income of R100,000 for the CEOs for ease of reference, the level observed for this ratio was 53.53 for JSE-listed entities and 69.88 in the South African financial services sector in particular.

This compared with a much lower ratio of 20.32 for Chinese executives.

At an economy-wide level, on what basis can we suggest that South African executives are so much more talented, innovative and capable than their Chinese counterparts, thus warranting overwhelmingly better pay?

As the panel’s report suggested, much more consideration should be given to section 27 of the Employment Equity Act, which is aimed at regulating the observed ratio between the top 5% and bottom 5% earners in all companies and institutions. If we are serious about confronting inequality, it is time to take aim at some of the arguments that have been used to buttress and defend excessive executive pay, which exists uneasily alongside large-scale impoverishment of workers.