Industry Insights

7 August, 2012

People in global executive jobs have been increasingly targeted for receiving significant salary increases and bonuses since the 2008 recession. The so-called “shareholder spring” that has taken hold to varying degrees in the European Union and US appears to be spreading worldwide, as the leaders of South African firms are now coming under scrutiny regarding compensation and bonuses.

Business Day reported that in South Africa, which is believed to have the world’s largest income disparities, executives are being pressured by trade unions and the government to narrow the gap between the lowest- and highest-paid workers and release detailed information regarding salary increases.

South African companies counter that in terms of executive compensation, they are simply following the example of corporations worldwide. "We are following the trends globally, particularly when it comes to the pay mix of executives," said Gerald Seegers, Human Resources Services Director at PricewaterhouseCoopers Southern Africa.

The firm recently released the fourth edition of its Executive Directors - Practices and Remuneration Trends Report, which showed how companies listed on the JSE (Johannesburg Stock Exchange) are using a mixture of fixed, variable and long-term bonuses to reward executives.

The report also outlined a general trend in executive compensation increases averaging 6.7% to 7.2% from March 2011 to March 2012. This represents a drop from the average 8% increase that South African executives received in the year prior.

Like his European and U.S. counterparts in the executive ranks, Seegers pointed to the challenge of retaining executive talent while trying to narrow pay gaps and keep remuneration costs under control. New regulations, shareholder activism and the concerns of stakeholders are driving South African companies to reconsider how they remunerate executives.

"It is evident that companies are approaching total guaranteed packages with greater caution. This is understandable when considering the greater reward and economic landscape both nationally and internationally," said Seegers.

South African media outlet Destiny Man reported that despite the drop in salary increases from 2010-2011 to 2011-2012, executives are still being targeted by shareholders. This led PwC to predict a continuation in the decline in pay rises for South Africans in the C-suite, with less of a rise expected in 2013.

PwC Director Martin Hopkins noted that increased pressure from shareholders and the government will likely lead companies to compensate executives through variable pay, such as performance bonuses, shares and option type plans.