Bonus blues for bosses
Global economic crisis hits SA firms’ executives
THE CURRENT global economic crisis is likely to see many top-level executives not receiving year-end bonuses this year, while those fortunate enough to do so may not be celebrating anyway as companies work to curb costs.
In recent years the bonuses received by executives have been seen as extravagant, but one of SA’S leading executive headhunters, Jack Hammer Executive Headhunters, believes that extravagance ended this year.
Managing director Debbie Goodman- Bhyat predicted there would definitely be “far fewer bells and whistles added to the salary packages of top leadership in the current climate” – whether they were existing or new appointments.
The reason, she added, was simply because of struggles companies were being forced to endure.
“If the company is not doing well, the bonuses will almost certainly be smaller than executives have become used to,” Goodman-bhyat said.
She also noted that the individual performance factor, which forms part of the bonus calculation, would be reduced to about 30 to 40 percent, with the potential for some companies to seek deferred payment plans to cover their own costs.
“New payment structures continue to be introduced, such as bonuses being paid out partly in cash and partly in shares or share options,” she explained.
Chief economist at the Efficient Group, Dawie Roodt, said the cutting of executive bonuses was understandable, although unfortunate.
“It is unfortunate because executives often have their bonuses cut in tough times, while ordinary workers are cushioned from the effects. But when the executives receive high bonuses for the work they do, there is a major uproar from the workers.
“The executives do the same amount of work either way, but when they receive low bonuses, there are no complaints.”
Regardless of companies’ performance, most workers would still receive year- end bonuses, he said.
Next year, Goodman-bhyat said, was also not looking good in terms of increases.
“In previous years, increases well over inflation rates were granted to executive teams. However, this time increases are more likely to be inflation-linked.”
Roodt added that the restraints were not genuinely financially related, since many SA companies had recorded success in terms of their budgets and financial statements.
He believed these lower increases could be the result of performance- based evaluations, which concerned him.
“What worries me is the effect on management, as we have a shortage of skilled managers.
“If companies do not need to pay high salaries, then they would not need to hire skilled managers.
“This concerns me as the future of South Africa requires skilled managers.”