Johannesburg – South African business executives are not being paid too much in relation to their global peers, but the wage gap between executives and labourers could cause resentment.
This is according to Gerald Seegers, director of human resources at advisory firm PricewaterhouseCoopers (PwC), who was speaking at a corporate governance conference in Sandton on Wednesday.
"Relative to their global peers, SA executives are not paid too much," said Seegers.
PwC conducts an annual study into the remuneration trends of listed companies.
In the South African context, said Seegers, the politically sensitive issue is the wage gap between the salary packages of directors and labourers. The gap can be as high as 300 times (including performance bonuses) that of labourers.
"But the gap is not the highest," said Seegers. The basic pay gap (excluding performance bonuses) is about 30 times more than that of labourers in South Africa, in Malawi it is 107 times more.
Despite executive remuneration doubling between 2006 and 2009 to an average of R4m a year for large-cap companies, Seegers said SA remained in line with global trends. During the same period, the average labourer's pay increased by up to 30%.
"Executives are remunerated for ensuring sustained capital growth and earnings for shareholders and for continued employment," said Seegers.
He acknowledged that the fortunes of executives do not always reflect performance. "There's a perception that directors get paid even if companies do not perform, or even instances where executives cannot legitimately claim responsibility for the (good) performance of the company."
In the latest annual executive pay study, Seegers urged remuneration committees of companies to consider shareholder and public perceptions, as well as economic conditions.
"They must be sensitive in deciding how to deal with underwater share grants as well as bonuses, particularly in sectors where the recession is still being felt – and especially in an economy where the lowest paid workers have annual salaries of around R42 000," said Seegers.
"This equates to a pay gap in the order of 250 to 300 times."
Referring to King III compliance, Seegers said a major focus areas for remuneration committees should be to re-evaluate the appropriateness of performance conditions and targets in respect of short- and long-term incentive plans. "They must also revisit levels of disclosure, and ensure they are prepared for greater shareholder consultation and AGM discussions."