PwC’s latest executive director’s remuneration and practices report shows that executive pay continues to come under intense scrutiny from all angles, with mounting calls from institutional investors to reform executive remuneration.
Despite numerous initiatives been taken around transparency and better reporting, the gap between executive pay and the pay of the average employee continues to widen.
While shareholders and other stakeholders place mounting pressure on regulators to curb the perceived high levels of executive pay and their incentive arrangements, executives in the corporate sector are also under enormous pressure to adapt to the changing business environment particularly with the advent of digitisation of the business world, the professional services firm said.
PwC said that its annual analysis of pay statistics indicates that the Gini coefficient of the employed has remained steady at 0.43, but there is evidence of companies beginning to attend to the plight of the most poorly paid employees.
The upper end of the pay ratio has decreased substantially from a range of 12.8 to 61.8, compared to a comparable range of 12.7 to 64.8 in 2016.
As at 28 April 2017, there were 1,174 (2015: 1,179) executive directors appointed to 360 active JSE-listed companies.
Included in this total were 355 CEOs (2015: 338), 310 CFOs (2015: 304) and 509 executive directors (2015: 537).
PwC said that the age profile reflects that there is a slight downward trend, with a median age of 52 and an average slightly higher at 53.
Board tenure for executive directors serving on the JSE remains relatively short at 4.8 years as reflected for reporting periods 1994 to 2016.
Remuneration trends: JSE-listed companies
The report reviews the total guaranteed package (TGP) for executives paid during the reporting period and includes an overview of short-term incentives paid to executives.
The average inflation in South Africa for the 2016 reporting period was 6.6% (2015: 6.2%). Over this period, the average increase paid to junior workers was 16% while for executives this was 5.7%.
The median executive pay for all JSE executives was R3.9 million (2015: R3.69 million).
PwC said that for the first time, it reviewed the executive pay of the JSE top-10 companies which account for 60% of the JSE’s market cap.
The average executive pay for CEOs in this band is R24.6 million. For CFOs the average is R13.8 million, and for EDs it’s R7.7 million.
Gerald Seegers, head of people and organisation for PwC Africa, said that in South Africa, there is a strong movement, particularly in the wake of the King IV report, pushing for listed companies to adopt better remuneration reporting and shareholder engagement practices, and for all organisations to implement fair and responsible remuneration policies.
PwC also noted that ‘say on pay’ is gaining momentum in the wake of increasing demands for South Africa to move towards a binding vote on remuneration.
“Worldwide, ‘say on pay’ is becoming the norm for shareholders to express their views on proxy filings and remuneration reports that disclose compensation paid to directors. In some countries we are seeing shareholders and other institutional stakeholders objecting to rewarding directors for failure to perform,” the group said.