Central bankers make a point with pay cuts
News last week that Reserve Bank governor Gill Marcus has effectively taken a pay cut put the spotlight once again on the issue of executive pay. The bank’s financial statements showed that she received a nominal increase of less than 1 percent to just over R5 million this year.
The increase was boosted by the revaluation of the “deemed” tax value of her official residence. Without this “deemed” revaluation, she would have had an actual wage cut. At all events, once inflation of more than 6 percent is taken into account, the real change was negative.
Deputy governor Daniel Mminele also took a cut, both nominal and real, as did several non-executive directors on the bank’s board.
The central bank was making a badly needed point. Given the inequalities in our society and the gaping wage disparities, greed is gross and moderation is cool.
Hard working enterprising bosses deserve to be properly paid. But, at a time of economic hardship and social instability, the politics of envy is a dangerous force. It is foolish to inflame emotions, whatever the economic justification for the increase. Executives who truly understand their own long-term interests will see the merit of curbing their own expectations.
Among those who showed this type of leadership was Standard Bank’s former chief executive Jacko Maree who, in 2011, decided to donate 10 percent of his annual salary to charity.
While the governor’s annual remuneration is well above the R933 852 the ordinary MP earns, it is a pittance compared with the packages received by chief executives in the private sector.
Bosses in the embattled mining sector have come under close scrutiny during the five-month strike in the platinum belt.
Comparisons are tricky because packages are constructed in different ways. However, a recent report in The Star showed the scale of mining bosses income: Lonmin chief Ben Magara earned R12.9 million last year, plus R11m in shares; Anglo American chief executive Chris Griffiths got R17.6m in basic salary and bonus shares; while Impala Platinum boss Terence Goodlace received a salary of R7.5m.
Bosses outside the mining sector are on a par, or not far behind, according to The Star report. The exception is Shoprite chief Whitey Basson, who receives just over R40m.
Of course there is a sound economic argument for paying chief executives a competitive figure. He or she is responsible for ensuring the companies they run are profitable. Without profitable companies to pay income tax, the fiscus would run short of funds and the number of jobs created would be even fewer than is currently the case.
However, there is another reason they should earn a lot. What you and I may not realise is that chief executives can be very needy. A survey several years ago showed the extent of the burden these people carry.
Many of them, all men, had not one family to support but two or three, following one or two divorces. If not for ex-wives, they were footing the bill for children from previous marriages, as well as their current families. Naturally, all attended expensive private schools.
For his current family, the breadwinner had to provide not one family home but two, or several; not one or two serviceable cars but top of the range models. Added to this were boats or other costly toys.
And, of course, there were the obligatory holidays, skiing in the Alps, sunning themselves on distant beaches or exploring the nooks and crannies of the world.
If this commentary sounds mean-spirited, it’s because it is. Sentiments like this give union bosses ammunition and help keep workers out on strike, even when it is not in their own long-term interests.
While union movements have helped improve the lot of workers around the world, they have also sold them short. They deliberately foster a sense of dependency – dependency on the union. They persuade their members that without solidarity with the working class they will never improve themselves. If they don’t actively discourage the concept of an individual achieving on his or her own they certainly don’t promote the idea.
While solidarity works well when industries can absorb the damage caused by destructive strikes, it is less beneficial in a changing world, where personal initiative can make or break a career.
Both bosses and workers need to take a fresh look at their options.