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"How can they justify it?" asked one. "It's a disgrace."
Last week Finance Week received confidential information that JSE deputy CEO Nicky Newton-King's pay was hiked 25%, that COO Leanne Parsons' package went up 24% and fellow director John Burke's salary increased by 17%.
All three also received huge increases last year and each now earns more than R2m (including bonuses).
CEO Russell Loubser took home a more modest increase - only 7% - but his salary is now more than R4m.
Members are outraged on a number of counts. They cite the declining listings, the 42 staff laid off last year to "cut costs due to poor business conditions", the high costs of the JSE building in Sandton (which has built-in rental escalations of 11%/year to 2015) and, closer to home for the members, their own declining fortunes.
As a business entity, the JSE recorded a smaller profit as well as smaller turnover from the decline in the value and volume of transactions in 2002 and 2003.
Around 60 companies exited the JSE last year. No doubt several more are planning similar action this year.
From the glory days of 668 companies listed on the JSE in 1999, SA stockbroking member firms now have a paltry 428 companies from which to scratch a living.
One stockbroking member (who asked not to be named) also cited the "insensitivity" of the increases, hot on the heels of the Dick Grasso scandal that essentially caused a revolution at the New York Stock Exchange.
Grasso, chairperson of one of the world's largest bourses, was forced to step down after it was revealed that he received around $180m (in total) in remuneration in 2003.
The Reserve Bank's challenge
Furthermore, the South African Reserve Bank - arguably this country's most influential institution - has taken steps to keep its salaries in line with acceptable standards after surprise was expressed about Reserve Bank Governor Tito Mboweni's 12% increase in salary in the year to March 2003.
But even he takes home little more than the deputy CEO of the JSE does.
Mboweni has publicly undertaken to keep Reserve Bank salary increases in line with SA's inflation guidelines. He also challenged the rest of SA's financial sector to follow his example.
Mboweni warned last week that some salary increases granted by the private sector were too high.
His remuneration package is currently around R2.5m/year and that of the Reserve Bank's deputy governor about R1.5m/year.
The Reserve Bank has fewer than five senior managers who earn more than R1m. Of course Reserve Bank employees don't have the benefit of share option schemes and, like JSE employees, may not invest in shares.
The JSE's Loubser dismissed Mboweni's challenge, saying that one should rather look at the JSE's total salary cost. "As a result of the staff cuts this may well be lower than in the previous year."
Salary increases in line with private sector
Loubser says that the salary increases for the three other members of the executive committee were to bring their salary scales in line with those of the private sector.
Newton-King, who received a 25% increase this year, says that even after this increase she still earns considerably less than someone with the same responsibilities in the service of, for example, Deutsche Bank.
Loubser and Newton-King also say that they don't have the benefit of a share option scheme, like others in the private sector.
Anton Botha, better known as Gensec MD and (until recently) one of the top five at Sanlam, is chairperson of the remuneration committee of the JSE's board.
He says that the committee decided on these increases after the salaries of the three executive members - but excluding Loubser's - were compared with what's on offer elsewhere in SA's financial sector.
Botha says that there was a significant shortfall, which had to be rectified as soon as possible to retain the services of these "three critical members of the executive".
However, he admitted that none had threatened resignation. Loubser's remuneration is in line with what can be earned in the financial sector, Botha says.
JSE's important influence
He says that while the JSE is a small financial institution "it has an important influence in the SA economy", and stability in the management was therefore very important.
However, he "regretted" the fact that the increases occurred at the same time as the retrenchments.
Loubser refused to disclose the details of the remuneration packages of the three executive directors to FW.
He says that the JSE's financial report for the year to end-December 2003, which will be available in about three months' time, will show the directors' remuneration for 2003 only and not 2004.
"Why don't you ask the man who told you (for more information)"? he asked.
Loubser and Burke both sit on the King Committee for corporate governance, which advocates disclosure of directors' remuneration.
The JSE boasted that it was the first to disclose what its directors and senior managers earned, even though it wasn't a requirement for the JSE.
Remuneration table
The table, from the JSE's 2002 annual report, shows that Loubser's remuneration was about R3.4m at end-2002.
The salaries of the three other executive committee members were all around R1.5m at end-2002.
Assuming a modest 10% increase for 2003, Loubser's remuneration should now be more than R4m, while that of the other three members should be in the region of R2m.
During the 2002 financial year, all four members received the maximum bonuses, despite the fact that the JSE was only able to record an operating profit of R2m for 2002 (R51m in 2001).
For the six months to end-June last year, the JSE showed an operating loss of R27m.
Newton-King says that business fared much better in second-half 2003, and that the executive directors once again received the maximum prescribed bonuses.
In 2002, the bonuses were R1.26m for Loubser and R558 000 for the other three members. The bonuses are already included in the salary packages above.
Apart from the four members of the executive, eight other management members each earned more than R1m.
After the departure of Sydney Maree there are now at least seven members of management who still earn more than R1m each. Loubser again refused to elaborate on their salary increases for 2003 and 2004.
Retrenchments
Referring to the principle of retrenching to cut costs and then granting huge salary increases elsewhere, Loubser says: "I don't see a contradiction in an adjustment in the salaries of critical staff relative to a retrenchment (the 42) as part of a decision to cut costs."
David Shapiro, of broking firm Barnard Jacobs Mellet, says that these salaries cannot be justified in the present climate in the stockbroking industry.
Lafras van Rensburg, a second generation broker at Thebe Securities supports Shapiro's view.
"We certainly did not increase salaries of so-called specialist and critical personnel out of the savings achieved from the approximately 30 staff members who had to be retrenched last year," Van Rensburg says.
The JSE
Shapiro also says that in any case the nine largest companies by market capitalisation with primary listings overseas - eight in London and one in Switzerland - are responsible for, by far, the greater portion of the total turnover on the JSE.
So in effect they're governed primarily by other stock exchanges. So that lessens the JSE's workload.
If exchange controls are lifted soon, even more SA listed companies will probably delist from the JSE, many broking firms believe. Then the JSE will hardly be more "than a branch of McDonald's", one stockbroker says.
Jaap du Toit, an executive director of listed financial services group PSG and responsible for the group's stockbroking and investment divisions, says that he's disappointed that the JSE felt it necessary to grant its executive directors increases higher than the average for SA.
According to PSG's latest financial statements, the annual remuneration of Du Toit (himself a CA) is just over R1m. That's probably a good indication of what the top management of a large broking firm earns.
JSE bonus scheme
Three of the executive directors each received a R558 000 bonus in 2002.
Loubser's bonus was R1 263 000.
According to the basic salaries, these are the maximum payable in terms of the scheme.
The executive that approved the bonuses therefore probably thought all the requirements had been complied with, though the operating loss fell from R51m to only R2m.
Executive pay at major exchanges
The Securities and Exchange Commission ordered the markets it regulates to submit a review of their executive compensation packages by October 3, 2003.
The following information comes from the exchanges or from SEC filings. Share and contract volume figures are year-end 2002 and come from the Securities Industry Association, the exchanges and other sources.
NASDAQ Stock Market 441.7 bn shares - Chairperson and CEO Hardwick Simmons: $750 000 salary and $1.7m bonus.
