High pay must be justified
THE Public Investment Corporation’s (PIC) recent votes against the remuneration policies of a number of gold and platinum companies has less to do with the level of pay and more to do with the vague, or in some cases nonexistent, targets on which executive performance is rewarded.
It is a poor reflection on these companies’ remuneration committees, and investors should be taking the directors to task.
It’s just a pity that in a number of cases other institutions didn’t follow the PIC’s lead. It might be incumbent on the trustees of pension funds invested in these companies to ask their asset managers how they voted and why they haven’t raised similar concerns about these remuneration practices. Especially in the cases where the PIC said it had voted against a company’s remuneration policy because it was inconsistent with best practice, or because there were no clearly defined group performance targets. It seems astounding that a board of directors would not put such targets in place, yet this was the reason why the PIC voted against the majority of remuneration policies.
In a couple of cases it was, how- ever, over the level of pay. In the case of AngloGold Ashanti, the PIC was blunt in its view, simply stating that it had voted against the CEO’s salary because it is “higher than the company’s peers”. Similarly with Gold Fields’ pay to its chairman.
Of course, it wasn’t only the gold and platinum miners that fell short of the PIC’s standards. It voted against the remuneration policies of ArcelorMittal SA, Exxaro and Capitec Bank. Pick n Pay in particular earned its ire over its executive share option scheme and the salary granted to its chairman, Gareth Ackerman.
Given the high levels of inequality in SA and against the backdrop of the recent labour unrest, in particular on the mines, one would have thought that the nonexecutive directors sitting on these companies remuneration committees would have been a bit more sensitive to the levels of executive salaries and bonuses they were awarding.
Of course, executive pay is an emotive topic, especially when it appears to be excessive. Executives ought to be rewarded, and sometimes well rewarded, when they have performed.
But how this is determined should be clear and transparent.