JSE chiefs' pay hikes soar well above the tide of inflation
As the debate about income disparities between workers and bosses rages on, a new report revealed that chief executives at many of the top JSE-listed companies received salary increases well above inflation during last year, alongside substantial increases to short-term incentives.
The chief executives in the top quartile of JSE-listed companies received average salary increases of 11% last year, comfortably above the year’s inflation rate of 5.8% according to the report from advisory firm PricewaterhouseCoopers (PwC).
Meanwhile short-term incentives, or cash payments based on company and individual performance, for chief executives of the JSE’s top 40 companies increased by 131%, after a 37% decline in 2012.
Increases in the total guaranteed pay packages – or basic salary and monthly benefits such as medical aid – for chief executives at large cap resources companies increased 9.3% to R8.8-million last year. The increase for chief executives of large industrial companies was 35.4%, taking the median total guaranteed package to R13.6-million. This is compared to the median increase across the JSE of 4.5%.
A number of factors drive these increases said Gerald Seegers, PwC head of human resource services for Southern Africa.
They include market benchmarking, given that the JSE had fared better than the rest of the economy during the period.
The level of short-term incentive increases was arguably driving the debate around the pay differential in the country, noted Seegers. Though the increases in these incentives were performance driven, there was the question of whether company performance was thanks to executives or the performance of the market, he noted.
The report found that the total pay of chief executives compared to that of entry-level workers averaged 150 times for JSE companies with larger firms reaching 300 times. This compared to a recent PwC survey of global mining companies which revealed average multiples of 600 times.
The report also examined the impact of the level of unemployment on the national earning inequality expressed in the Gini coefficient.
Looking at over 500 companies employing one million people, PwC calculated the Gini coefficient for the employed at 0.44. If the local unemployment rate could be reduced to levels of 10%, similar to that of the US, then the Gini coefficient reveals a drop to 0.54, PwC calculated.
This could suggest, the report argued, that it was the gap between the wages of the employed and zero earnings of the unemployed, driving South Africa’s Gini coefficient, rather than the gap between highest and lowest income earners.