Bonus blues for bosses

Global eco­nomic cri­sis hits SA firms’ ex­ec­u­tives

Weekend Argus (Saturday Edition) - - BUSINESS - JU­NIOR BESTER

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.”

ju­nior.bester@inl.co.za

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