Investors irked by soaring executive pay
According to a report that was issued this by Deloitte week, investors have numerous concerns when it comes to local pay cheques that run into millions of rands for bosses.
The survey found that executives at JSE Top 100 companies earn R3 million to R56 million or more a year, depending on the size of the company and other factors.
This pay compares with South Africa’s per capita income of $5 718 (R74 679) a year in 2015, according to World Bank estimates.
This sort of remuneration is alarming as South Africa is one of the most unequal societies in the world, and is dealing with high levels of poverty and a general unemployment rate of 27.7%. Investor concerns include: A general lack of disclosure; Increases in total remuneration without acceptable justification; Increases of base inflation; and Hikes in pay amid weak performance. When it comes to cash incentives, investors are worried about a lack of a demonstrable link between performance and bonus payouts.
On the topic of share-based incentives, investor concerns include:
Insufficient disclosure on performance criteria and conditions attached to longterm share plans; and
One-off retention of transaction awards that have not been adequately justified.
The Deloitte report follows a year of research that covered six years of executive remuneration and company performance data, and a detailed review of the remuneration reports of JSE Top 100 companies.
“Executive pay continues to attract media scrutiny both locally and abroad, with headlines on executive pay appearing frequently,” the Deloitte report said.
“The disparity in levels of top executive pay in relation to those of the lower-paid workers is a societal concern worldwide.
“This is particularly the case in South Africa, with its additional transformational needs and high levels of unemployment, which contribute to a powder keg of potential dissent and disharmony.
“Despite the increasing scrutiny on executive pay increases, executive guaranteed pay increases in general have well exceeded inflation.”
The survey found that the index of top executive pay had generally tracked turnover growth, but outstripped corporate earnings increases.
The report found that large companies with an international footprint paid more than their smaller counterparts, however, among mid-tier companies, there was no apparent sense of top executive pay being linked to the size of the company or the complexity of the sector.