SA’s top bosses are ‘underpaid’

Chief executives, chief financial officers and executive directors in SA are paid less than their overseas counterparts, says the South African Rewards Association. Picture: Pixabay

Chief executives, chief financial officers and executive directors in SA are paid less than their overseas counterparts, says the South African Rewards Association. Picture: Pixabay

Published Jan 15, 2024


Durban — Despite receiving hefty packages estimated to be between 150 and 949 times more than the average worker, top executives in South Africa are underpaid.

This is according to the South African Rewards Association (Sara), which said compared to their international counterparts, local executives earned below average, and that constant public debate about “excessive pay” should be seen within context.

“There is the odd individual who sometimes pops up who has earned a massive amount in a share scheme, but by and large my view is that the executive in SA is paid possibly lower than what they could get elsewhere,” said Sara’s master reward specialist and exco member Laurence Grubb.

One of the organisation’s duties is to help companies determine what employees should be paid, from top management to those at the bottom of the wage scale.

Grubb said that when it came to executive remuneration in South Africa, there were a number of factors that had to be considered, including significant political interference; the brain drain; strong labour movements; a skills and qualification deficits, which resulted in productivity issues; and constantly changing rules and legislation, which companies had to adapt to all the time.

“You’ve got to look at the exchange rate and the cost of living in South Africa versus elsewhere. Other factors, such as crime, violence and the risks and dangers associated with living in South Africa, which is becoming a bigger issue, help explain why we have a brain drain. We also have to take the complexity of running an organisation in South Africa into account,” he said.

According to Grubb, there were also perceptions that private or listed companies were treated like “the enemy” in South Africa and not necessarily seen as important to the growth or the success of the country. In addition, some government ministers were of the view that big business was bad for the country, which also had to be taken into account.

“If you do a parity analysis using the cost of living and exchange rate and all those things on the guaranteed paid side, executives are not paid out of line. In fact, they would be considered to be paid below the line, below the median, below the average. Some of it can change, depending on the industry you are in, and also the variable pay, particularly the long term incentives and share schemes.”

Grubb said South Africa followed a UK-type model for executive remuneration and even then, if it was converted to pounds, the figure became irrelevant.

“By and large, the executive in South Africa is paid lower than they could get elsewhere,” said Grubb.

“Well, then, send them elsewhere,” was the reaction of Mervyn Abrahams, head of the Pietermaritzburg Economic Justice and Dignity Group.

He said an isolated approach was taken when considering the remuneration of chief executives, but it should be considered in the context of a growing economy.

If a chief executive’s remuneration in South Africa was compared to that of their UK counterpart, then the figures had to be converted to rands and you had to consider what their expenses were here, compared with those abroad. Qualifications, experience and workforce satisfaction should also be taken into account, said Abrahams. He thinks a pay cut for those at the top and a salary boost for those at the bottom would make a huge difference.

“They (chief executives) are earning in rands and buying in rands. They are living a pretty good life so they can make a sacrifice for South Africa. But there is very little patriotism from an economic point of view. It’s about what is in it for me and never mind what happens to the rest,” Abrahams said.

According to Grubb, in some industries such as the mining sector, there was only a small pool of executives that could successfully run a company. In 2023, a number of JSE-listed companies had to hire executives from abroad and he had been involved in the process.

“I can tell you there are premiums involved there. If you want to bring in a foreign CEO to work in this country and run a South African organisation, you are going to pay a premium to get them in. They are not going to come at the same rate as a South African CEO.”

Despite the questions raised over the remuneration of former Eskom chief executive Andre de Ruyter (R7 million), Parliament’s chief executive Xolile George (almost R5.5 million), the chief executives of other South African companies earned much more. It was not unusual for those in charge of multinational companies, particularly in the mining sector, to earn more than R200 million a year.

Writing in The Conversation in November, Imraan Valodia and Arabo Ewinyu from the Southern Centre for Inequality Studies at Wits University, said that whether it was measured by income or wealth, inequality in South Africa was huge and therefore subject to acute public scrutiny. Their own research on the issue also highlighted the inequality within firms.

“Using a sample of companies across various sectors of the economy, our analysis showed that CEOs earn between 150 and 949 times more than the average pay of all South African workers,” they wrote.

This year, South Africa’s lawmakers will have to deliberate on a slew of bills, among them the Companies Amendment Bill and the Companies Second Amendment Bill, which was tabled in 2023, and would make it compulsory for companies to disclose their pay gaps.

In the US, similar debates about excessive executive pay have been raging for years. Last year, Kiwi Camara, the chief executive of legal tech firm CS Disco, made headlines when it was revealed that he had earned $110 million in 2022, more than Apple chief executive Tim Cook, who took home $99 million.

Abrahams said you could not compare executive wages in South Africa to those of chief executives in Switzerland, for instance, because they were not earning the Swiss franc and they were not spending in the Swiss franc.

Grub said the media played a pivotal role in shaping public perceptions of executives.

He said sensationalism and exaggeration could distort reality, leading to the actions of a few being perceived as the majority: “There is no doubt that poverty is a huge issue in South Africa, but is this due to executive pay or poor education, corruption, poor economic policy and maladministration?”

Abrahams countered that: “It’s those at the top who are setting wages for those at the bottom so they are the ones maintaining these big gaps.”

He said a sustainable economy looked at how many people could participate in the economy, how many were able to save and how many could go out and buy goods and services and pay for them.

“Part of the reason why we have so much unemployment is because workers are paid so low that they can’t afford certain things that could have been produced in South Africa. They can spend their money on three or four things like transport and food but not on other things and services like internal tourism,” he said.

In September, PwC released its Executive Directors Practices and Remuneration Trends Report, which analysed the remuneration paid to the executives of the top 200 companies listed on the JSE between March 1, 2022 and February 28, 2023.

The total guaranteed package, which includes base salary as well as benefits, indicated that the average income of chief executives was R9.36 million, chief financial officers R5.93 million and executive directors, R4.84 million.

Black, coloured and Indian chief executives made up 19% of the total, 26% of chief financial officers and 42% of executive directors.

Sunday Tribune