Tell the truth — and fear no rich list

AFTER last year’s rich list, a number of business leaders protested to this newspaper. Their moans were many: it makes us look richer than we are because we get paid multi-year bonuses in one year; relatives come knocking for money; it can lead to unrealistic expectations in wage talks.

Yet few of these irked bosses, you can imagine, would demand a veil of secrecy be drawn over how much it cost to build Jacob Zuma’s Versailles down in KwaZulu-Natal. Sure, it’s taxpayer money being used on Nkandla — but then the CEOs were also being paid from cash reserves owned by public shareholders.

Their reasoning was self-serving. After all, if you’re carting home a hefty salary while retrenching workers and your stock price is sliding, well, who really is being insensitive?

Of course, labour relations are tense, but hiding your loot from the disinfectant of sunshine will only inflame tensions more when it does eventually emerge.

What causes less outrage, however, is when bonuses are reasonable and justified.

Few will be able to argue that Coronation’s former CEO, Hugo Nelson, didn’t deserve his R12.6million bonus, given that his company’s stock has climbed 396% in three years, for example.

But less clear cut is the case of Gold Fields CEO Nick Holland, No 5 on this year’s list of bestpaid people, who got R45.3-million, including R25.3-million in gains on share options. Yet last year Gold Fields’ stock fell 16.7%, and it’s down another 55% this year.

That’s the point of a rich list: it helps shareholders paying those salaries to assess them in the light of a manager’s performance.

Of course, the elite don’t like rich lists. As the Telegraph says: “The aristocracy loathe the list. This is in part due to an embarrassment about money, but also because it is a category very difficult to get right. Old fortunes are well hidden.”

But there are important reasons why, in any well-functioning, accountable democracy, this kind of analysis is critical.

First, ratings agency Moody’s found a link between exceptionally hefty CEO pay, which is divorced from its peers, and “credit risk” at a company. This highlights “weak boards or poor decision making”, it says.

Second, a Harvard study found that thanks to public disclosure of outrageous pay packages by the likes of Fortune and Forbes from 1992 to 1994, the worst offenders “increased the sensitivity of cash compensation to firm performance” and hiked pay to a lesser extent than rivals.

Rich lists make executives more accountable to shareholders and the public. And no proper democracy ever suffers from more transparency.

This is especially so when the rest of the world has already got warped ideas about how backward South Africa is, thanks to the sort of poverty-stricken analysis in The Economist this week. Many believe the Economist is the all-knowing oracle. It may be, provided you don’t know too much about the subject.

The weakness of the article, Braai the Beloved Country, went beyond paralysing clichés, such as how by the end of the 1990s, many whites “withdrew to suburban ghettos to enjoy a braai on weekends among their kin”.

There were the errors too, such as describing Cyril Ramaphosa as “the country’s suave deputy president”. Now, Kgamela Motlanthe might seem a marginal presence, but we should at least pretend he’s still around.

The Economist tells us too that back in 1994, three of the four largest media companies were “run by Anglos — whites of an English-speaking heritage”.

But surely what this “lost in translation” moment refers to is how Times Media and the Argus Company were, until the 1990s, controlled by Anglo American, a name commonly shortened to Anglo, which was then misconstrued?

With such feeble “analysis” peddled about South Africa’s supposedly gloomy future and racial division, the country’s corporate sector needs to show why it isn’t scared of transparency and accountability.