Ignore at your peril

Aug 31 2012 08:26
Mzwandile Jacks

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THE shocking deaths of 44 miners at Lonmin's Marikana platinum mine in North West province earlier this month has put the thorny subject of excessive executive pay back on the news agenda.

According to news reports this week, Lonmin's outgoing CEO Ian Farmer was paid about R1.2m a month last year while a rock driller received about R10 500 a month cost-to-company.

The rock drillers' pay figure was provided to the media by trade union Solidarity. However, it has been strongly refuted by workers, who insist that they get paid about R4 000 a month.

According to Lonmin's 2011 annual report Farmer, former chief financial officer Alan Ferguson and financial officer Simon Scott received salary packages totalling R38m last year.

City Press reported that in comparison, the 4 252 rock drillers in Lonmin's employ would together earn total pay of about R44m for this financial year.

Scott was appointed Lonmin [JSE:LON] CEO this week, replacing Farmer who is said to be ill. Farmer was admitted to hospital shortly before the carnage at Marikana.

I believe it is an indictment of South African society that some miners' kids can go to school famished when company executives pay themselves millions of rands in salaries, bonuses and share options.

South Africa, according to the United Nations Children's Fund (Unicef), is home to nearly 19 million children, many of whom are vulnerable. Unicef says two-thirds of all South African children live in poverty – many in homes with unemployed, single, chronically sick or elderly parents and caregivers.

Even so, excessive executive pay in South Africa continues. It also happens at a time when the matter has received intensified scrutiny in South Africa and the developed world.

Large pay inequalities are damaging for South African business, the economy and society as uneven societies undergo greater levels of social turbulence and doubled sickness rates.

The pay gap between executives and workers could nourish extensive emotions of raw injustice, and weaken faith in local businesses.

Since the police guns went off in Marikana, there has been an outpouring of citizen commentary on the necessity to combat extreme executive pay. In South Africa, the issue of executive pay has been bubbling under for some time now. It has always been a delicate matter.

It would be foolhardy for South African company executives to ignore the growing discontent regarding their salaries. I think they should attempt to do something about it sooner rather than later.

I have always thought that once it became compulsory for listed South African companies to reveal their pay packages in their annual reports, their boards wwould think carefully about what they pay executives. But this has not been the case.

South African executives know how to play the media. Once a shocking pay package story hits the headlines, they just lie low for a couple of days, forcing the furore over their salaries to die down.

There were reports a few years back that Whitey Basson, the head of the JSE-listed Shoprite Holdings [JSE:SHP], had been paid an unbelievable remuneration package.

But nothing was done about this though one would have thought it would spark some nationwide movement and outcry.

The worst has happened instead. Executive pay has increased faster than the wages of ordinary workers in the past 10 years.

Strangely, South Africa's trade unions and the government have done very little to question this.

What happened in Marikana was sad and still is. But it should provide opportunities for South Africa's company executives to fix inequalities.

It should prompt them to find ways and means of making sure that workers are paid better salaries, so that their own pay packages need not come under serious scrutiny.

 - Fin24

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executive pay  |  wage disputes



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