Executive directors report 2019

Practices and remuneration trends report

South Africa's top companies are starting to embrace the concept of fair and responsible remuneration - but more needs to be done.

Overview

The central theme in our report this year is the role of the CEO, and we ask what factors companies should take into account when calibrating their philosophy towards CEO pay. We also explore the role of the CEO in setting the remuneration strategy of the organisation. Closely tied to the role of the CEO is the need for proper succession planning and whether CEOs are satisfied that they can build a future-fit workforce – according to PwC’s Talent trends 2019: Upskilling for a Digital World, 33% of South African CEOs are ‘extremely concerned’ about the availability of key skills. From our most recent discussions with institutional investors, it is clear that the depth of expertise required from remuneration committees to set and monitor performance conditions, and critically assess the suitability of variable pay structures, remains lacking. Furthermore, a CEO who claims to be worth a king’s ransom must be prepared to back up that claim by accepting a suitably challenging set of key performance indicators.

This publication focuses primarily on the Johannesburg Stock Exchang (JSE) and includes, as separate chapters, high-level analyses focused on the FTSE 100 and seven African stock exchanges. Data set out here is drawn from PwC’s internal resource base and information publicly available on 30 April 2019 (the cut-off date) and is valid for the period 1 May 2018 to 30 April 2019.

 

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Profile of an executive director

Executive directors are responsible for the successful leadership and management of the organisation according to the strategic direction set by the board of directors. Mandatory appointments are CEO and CFO.

The cut-off date to view published accounts for listed companies was 30 April 2019. As at this date, there were 1 198 (2018: 1 144) executive directors appointed to active JSE-listed companies. There were 335 CEOs (2018: 342), 310 CFOs (2018: 325) and 435 executive directors (2018: 477) in office at that date.

No discussion about the economics and ethics of pay in South Africa can be isolated from the context of the overwhelming level of unemployment in this country, and the pressure that this puts on the government, the economy, and the workforce.

Trends in fair pay

Business and organisations need to conceptualise innovative ways of realising the concept of fair and responsible remuneration. That said, companies need to understand that eroding a pay-for-performance culture and rewarding executives for failure can, in turn, damage the fairness of pay in relation to that of other employees.

Gender equality remains a focus area for many companies worldwide, as the awareness surrounding the gender pay gap continues to gain momentum.

Quartile analysis of pay for men and woman in South Africa

The gender pay gap is the gap between what men and women are paid at TGP level. Most commonly, it refers to the median annual pay of all women who work full time and year-round, compared to the pay of a similar cohort of men. The following graph shows the executive director gender pay gap, in line with the ICB classifications.


Board tenure

Average board tenure for executive directors on the JSE for reporting periods 1994 to 2018 is 4.5 years. The longest tenure is for EDs: 4.7 years, followed by CFOs: 4.5 years, and CEOs at 4.3 years. In all these positions, the director may have been incumbent for a longer period; the analysis is limited to the tenure in the positions quoted.

Contact us

Gerald Seegers

Partner

Tel: +27 (0) 11 797 4560

Anelisa Keke

Senior Manager

Tel: +27 (0) 21 529 2450

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