Total executive pay levels in South Africa in the past year have increased significantly, despite rising public scrutiny, shareholder activism and new regulations.
Now in its fourth edition, the Executive Directors – Practices and Remuneration Trends Report (compiled by PricewaterhouseCoopers) analyses executive remuneration at all 373 JSE-listed companies, based on information taken from their annual reports as at 30 April 2012.
“In the past year we have seen shareholders and institutional investors becoming more vocal than ever regarding perceived excessive payments made to executive directors,” said Gerald Seegers, Human Resources Services Director of PwC Southern Africa.
“It remains a tough act to balance the interest of all stakeholders including shareholders, the wider base of employees, the government, the public and especially the expectations of executives directing companies on a daily business to remain profitable, increase profitability or return to profitability,” Seegers added.
On average total guaranteed packages for the 12 months prior to March 2012 increased by between 6.7% and 7.2%, down from between 7.6% and 8% the year before.
Median increases for executive directors of large, medium and small capitalisation companies were between 6% and 8%. Increases exceeding 8% tended to be in instances where there had been a change of leadership.
Seegers said it was evident that companies were approaching total guaranteed packages with greater caution. He did not expect total guarantee pay increases for 2013 in South Africa to exceed inflation.
PwC director Martin Hopkins said focus would turn to variable pay such as performance bonuses, share or option type plans, as the differentiating element to either reward performance or attract critical skills.
Actual short-term incentive payouts for the period rose significantly. Large-cap CEOs received a median short-term incentive, which at R8.25 million was more than double that of the medium cap CEO (R3,72 million), while the small-cap CEO received a payout that is one eighth the size of the large-cap CEO at R981 000.
Increases also varied by industry, with CEOs in basic resources receiving a subdued 6.1% increase but off a high base median level of R8.4 million for total guaranteed package.
CEOs in the service industry received the highest raise at 10.7% on the median level of R6.18million.
AltX-listed-company CEOs were the poor cousins, with a median level of R1.5 million but received a 8.9% increase. The difficult economic climate took a toll on the AltX group of companies and saw a significant number delist.
Profile of executive director
The report also found that the number of executive directors of JSE-listed companies had risen from 1 146 last year to 1 151 this year. Compared to global norms, the South African executive director was relatively young with a median age of 50. This reflected the skills crisis in South Africa, Seegers said.
Transformation was still a thorny issue, with black, coloured and Indian representation having risen from 10% in 2011 to 16% this year.
The percentage of women in executive positions had almost doubled from 4.2% to 8%.
Companies were still getting to grips with the stipulation by the King III Report on Corporate Governance that prescribed officers’ remuneration had to be disclosed. Companies were still not clear on which individuals to include and therefore relevant data was limited, making analysis impossible.
To provide clarity, Hopkins said these were persons that had general executive authority over the company, or a significant part thereof, concerning the financial affairs or day-to-day operational responsibility.