New rules to bring remuneration transparency

When amendments to the Companies Act are signed into law, companies will have to disclose the gap between the highest-paid and the lowest-paid employee.

Amendments to the Act will compel companies to reveal the gap between the lowest-paid worker and the chief executive, essential information in a country often described as the most unequal in the world.

The amendment to Section 30 of the Companies Act has been passed by parliament and is to be signed into law by the president.

It will compel JSE-listed companies and public companies like Eskom to disclose pay ratios and give shareholders binding voting power on remuneration policies.

Companies will have to disclose total remuneration of the highest-paid employee, the lowest-paid employee, average remuneration of all employees and median total remuneration of all employees.

The new rules will help the public understand the “reasonableness” of these pay structures.

Is it reasonable to pay a chief executive R50 million a year?

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Shoprite reported paying its CEO Pieter Engelbrecht R68  million in its 2024 financial year. Shoprite provides over 150 000 jobs.

These workers, in turn, spend money at other local businesses, and keep money circulating in the country.

Some banks and investment firms, pay extremely high packages and employ few people. Banks also have few low-paid workers.

The Labour Research Service (LRS) monitors about 70 JSE-listed companies and for the 2024 financial year, for the first time, we have looked at pay ratios for the JSE top 40.

In that year the amendments to the Companies Act had not yet come into effect, so we calculated the ratios based on the national minimum wage of R27.58 per hour, or R1 103.20 a week.

Naspers’ CEO Bob van Dijk earned over R340   million in a year (with the new CEO Fabricio Bloisi to earn close to R1  billion this financial year).

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It would take a minimum wage earner over 1  500 years to earn the R89  million which Standard Bank CEO Sim Tshabalala earned last year.

These figures are much higher than recommended by the UN Research Institute for Social Development for developing countries, where a more equitable and socially responsible range for executive remuneration to minimum wage is roughly 10-50:1 as a normative range, with about 30:1 as a midpoint (executive to worker pay).

Companies claim that remuneration packages are performance-based.

However, a recent study by the Labour Research Service and Active Shareholder (reported on by AnnCrotty) in Currency News showed the link between profits and pay is random.

Active shareholders often vote against high remuneration packages, but the company is not obliged to take this into account. This is set to change.

In SA, 10% of the population earns 55%–60% of all income. The next 40% of the population (middle class) earn about 30-35% of all income but only own 5-10% of all wealth.

The poorest 50% earn about 10% of the income and own no wealth.

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CEO remuneration