CAPE TOWN - Women comprised only 14 percent of 329 chief executive officers (CEOs), 291 chief financial officers (CFOs) and 826 executive directors of companies listed on the JSE, on February 29, a PricewaterhouseCoopers (PwC) survey on remuneration trends showed yesterday.
The lack of equal female representation was even starker at CEO level, where the percentage was only at 6 percent. “The gap identified paints a bleak picture and makes it clear there is still much work to be done,” the PwC survey said.
Black African, coloured and Indian/Asian representation at CEO level also remained low at 11percent of the Top 100 companies on the JSE. At executive director level, this representation was somewhat better at 28 percent of the top 100 companies.
PwC director and co-lead of PwC’s Executive Directors’: Practices and fees trends report 2020, Leila Ebrahimi, said company leadership were being faced with one of the most brutal recessions in history, and new leadership skills would be required to navigate companies through the pandemic and socio-economic uncertainty.
“The pandemic and its consequences are testing companies like never before. Matters such as environmental concerns and pay inequality have been pushed to the forefront, while talks of the ‘great reset’ have entered the public discourse,” said Ebrahimi.
According to the report: “We are seeing a scramble to incorporate appropriate underpinnings into remuneration structures, and rising alarm that environmental, social and governance (ESG) strategies are underdeveloped, and the materiality of different ESG risks to the business has not been fully assessed. We believe if targets are meaningful, and linked to a planned strategic shift, they can be an effective risk mitigation tool that investors will support within pay plans. Overseas, this shift has already begun.”
The median pay for JSE CEOs across all sectors was R5.2million for the period April 30, 2019, to February 29, 2020. For JSE CFOs the median pay was R3.2m, and for executive directors it was R3.1m.
The median pay for CEOs of large-capitalisation companies was R13.3m. For CFOs of large-cap companies, the average pay was R7.6m and for executive directors R5.6m.
For the 2020 financial year, the pay for executives across all industries was forecast to rise 5.2percent, being 5.4percent for executives in financial services, 5.1percent for directors in basic materials, while telecommunication executives were expecting a rise of 4percent. Following the pandemic, many short-term incentives had not been paid out, or would not pay out, due to the failure to reach previously set targets. Many executives also took pay cuts.
Proposed amendments to the Companies Act would introduce mandatory disclosure of the pay gap between the lowest-paid employee and the CEO, or highest-paid employee.
“Without an acceptable ratio, or range, even with mandatory disclosure, it will be difficult to conclude on acceptability of the pay gap,” the report said.
PwC did an analysis to explore how far removed South African pay gaps were from the oft-cited “ideal CEO to average worker ratio” of Drucker, which is a ratio of 20:1 (or 25:1). When the analysis used the National Minimum Wage as the lower reference point, the results showed a 66x multiple.
When the National Minimum Wage was substituted for an “unskilled median wage”, using the PwC Remchannel salary survey database, the multiple shifted to 24x, within the range of Drucker’s ideal.
“From a South African perspective, efforts at reducing income disparity may be better directed at increasing the pay level of the lowest level workers, rather than overly focusing on executive pay at the top,” the report said.
PwC said companies might need to consider turnaround incentives in the current environment, to regain stability in the company and drive specific objectives.
Turnaround incentives would require input from shareholders and other stakeholder groups. Previous aggressive growth targets for long term incentives might need to be reconsidered, and alternatives such as the safeguarding of value, and minimising the effects of the downturn, were suggested.
“As companies shift down a gear to strategise and reposition, they have the chance to consider what is important and what is realistic,” said Ebrahimi.
BUSINESS REPORT