In­vestors irked by soar­ing ex­ec­u­tive pay

CityPress - - Business - JUSTIN BROWN justin.brown@city­

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.

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