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Top directors' salaries jump 23%

Johannesburg - The earnings of executive directors of JSE heavyweights are rising continuously, while directors of smaller companies are seeing theirs shrink or remain constant.

Over the past year the salaries of executive directors at the Top 40 JSE companies have risen 23% and their short-term incentives 56%.

This is revealed in PwC’s third report on the remuneration of executive directors, which was released on Thursday. The report examines the annual reports of 384 JSE companies published in the year to end-April.

Total remuneration of heads of companies with a small market capitalisation declined 6.7%, from R2.03m to R1.9m.

Gerald Seegers, tax director and head of human resource services at PwC South Africa, said this trend at small-cap companies was in line with international trends.

Directors’ remuneration continually makes the headlines because the salaries paid to workers differ considerably from those of the directors, said Seegers. It has been reported that the difference in salaries between South African company heads and ordinary workers can be as much as 300 times.

This means that the highest paid worker earns 300 times more than the lowest paid worker.
Seegers said it is not only in South Africa that there is concern about the differences in earnings.

There is increasing pressure on companies to disclose the gap.

In the US companies are obliged, in terms of legislation, to disclose certain information about differences in income.

The focus, said Seegers, should be on fair remuneration of employees: senior managers need recognition if the best skills at that level are to be attracted, and the other employees should be paid a fair salary for the work they do.

He said levels of remuneration in the market depend on the sector in which the company operates and the size of the company itself.

The report shows, for instance, that most large and medium-sized companies allowed increases in total guaranteed packages while small companies showed the opposite.

“Total guaranteed package” refers to all components of a director’s pay that are guaranteed, including basic salary and benefits accruing on a monthly basis.

Short-term incentives – cash payments based on the performance of both the company and the individual over a year – have also significantly increased among large and medium-sized companies.

Among the Top 40 companies the short-term incentive median was 58% higher – up from R2.4m to R3.8m.

At medium-sized companies short-term incentives were 65% up .

The report considers it unlikely, given the economic environment that continues to improve, that directors’ remuneration packages will fall.

Companies are more likely to persist in awarding significant increases.

With shareholders becoming more outspoken, and directors’ remuneration under increasing scrutiny, companies must expect to face more challenges about what directors are being paid and why.

- Sake24

For business news in Afrikaans, go to Sake24.com.
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