South African bosses’ pay is on the rise, despite many critics arguing that top executives take home too much of the pie. The average CEO in South Africa took home R5,35-million last year, up from R4,3-million the previous year.
Human capital management company Mabili says in its annual report on directors’ remuneration that directors received robust increases in pay last year. There was a 24% increase from last year, Mabili CEO John Shaw said.
The report once again raises concerns about the gap between senior executives and average workers, which Shaw said continues to grow aggressively. South Africa saw several bitter strike actions, workers increasing citing disenchantment with top management pay as their reason for striking.
Last year, Mabili found CEOs earned 138,7 times more than the average wage worker. This ratio has now risen to 145.
‘The trend of increasing pay gaps sends out a powerful message and does much to marginalise workers,” Mabili said in its report.
Shaw said the unhappiness in South Africa’s labour market had as much to do with the poor packages of workers at the bottom of the ladder, as it had to do with large packages of bosses.
‘If the workers were earning a more reasonable wage then the rewards awarded to the top bosses would be less contentious,” he said. ‘Seven and eight-digit salaries seem high when the masses of lowest paid workers are living under difficult conditions.”
Shaw said that in South Africa, while poverty remains widespread and minimum wages remain low, executives’ salaries will be perceived to be ‘exorbitantly high”.
Mabili acknowledged that senior executives are important stakeholders who assume a high level of risk and responsibility in steering companies, but said it was the workers on the ground that turned the strategy into reality. ‘Thus, while the ever-increasing executive packages are designed to motivate and retain senior level employees, they do little to keep the workforce motivated,” it said.
The report was also worried about the weak link between performance and pay. ‘Directors are given large incentives for good performance, even when the performance of the company is greatly influenced by external forces,” it said.
The report noted that the retail industry has been buoyed by the positive spending climate last year as orchestrated by government policy. ‘Yet senior bosses are the ones who reap the majority of the rewards,” it said.
The average package for a CEO in the consumer services sector was R6,3-million. Here the telecommunications industry and retailing were the juggernauts. Mabili found that of the 12 general retailers featured in the report, five of the CEOs and one executive chairperson received packages of more than R5-million. Both Phuthuma Nhleko of MTN and Sizwe Nxasana of Telkom brought home more than R14-million.
Mabili highlighted the case of Shoprite Checkers where its CEO, Whitey Basson, was paid a salary package of R59-million, making Basson the country’s highest paid director. Basson’s salary became a contentious bargaining point in strikes at Shoprite Checkers in the past year and led to shareholder debate.
The average salary for a mining CEO was R6,6-million. The CEOs of dual-listed mining companies Anglo American, BHP Billiton, Lonmin and Sappi brought home the most money as they received foreign-currency-denominated packages. The largest salary in the sector went to Chip Goodman, CEO of BHP Billiton amounting to R29,5-millon. Llewellyn Herbert from Tranhex received the smallest package of R1,4-million.
In the consumer goods sector SABMiller rules the roost. Chief executive Graham Mackay received the largest package of the sector — R18,2-million. In contrast the average consumer goods CEO received R3,6-million. In spite of Mackay and other directors in SABMiller receiving sizeable packages, the beer company showed the lowest total package to profit after tax ration.
Other big earners in the sector include Tiger Brands’s Nick Dennis with R11-million, including a R5,3-million bonus, and Peter Staude from Tongaat-Hulett with R5-million.
The financial sector also rewards its CEOs handsomely, with the banks sub-sector coming out tops. The average CEO package in this sector is R6,6-million and many of the top brass are paid in foreign currency. Jim Sutcliffe of UK-based Old Mutual rakes in a salary of R17,1-million while Standard Bank’s Jacko Maree received the highest rand-based package of R14,8-million.
This sector also boasts the highest paid chief financial officers, amounting to an average of R5,4-million.
Mabili also noted that South African Airways boss Khaya Ngqula first received R4,7-million for four months of work at the Industrial Development Corporation, and then went on to receive R2,3-million for seven month as CEO of SAA. The report said this was a particularly high salary for parastatal employees.