Dominating boardroom trends in SA: purpose, retention and risk

Dominating boardroom trends in South Africa seem to centre around purpose, retention and risk, with environmental, social and governance (ESG) themes still a priority in 2021. In response, boards redefined organisational purpose and ensured that ESG considerations are incorporated in all areas of business.

According to the 2022 PwC Non-Executive Directors annual report that surveys boardroom trends in South Africa, redefining organisational purpose and incorporating ESG considerations is vital to rebuild trust with stakeholders and deliver sustained outcomes, with the most important aspect retaining and attracting the people required to drive the change.

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Trend of purpose redefined

The survey indicated that listed companies are rethinking how they define their purpose considering the global issues dominating the world’s political and media agendas, says Leila Ebrahimi, PwC reward practice co-lead and partner in PwC’s people and organisation division.

“Climate change, inequality and the role of business in tackling these challenges are a priority in boardroom discussions. Every company has a social and environmental impact and boards are carefully considering how strategic changes can affect their organisations’ impact.”

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Trend of staff retention

Retaining staff overlaps with the current Great Resignation period when many skilled employees left corporate structures to find greater fulfilment in their work lives as free agents. Trends indicate increased retention awards and sign-on bonuses that confirms that companies are struggling to retain key talent.

Andreas Horak, PwC reward practice co-lead and director in PwC’s people and organisation division, points out that proposed amendments to the Companies Act to give shareholders more power to vote on remuneration, could further impact retaining talent.

“We have seen support for executive remuneration decisions decreasing and shareholders pushing back on many issues. As a result, boards can feel hesitant about making decisions they believe will increase organisational agility and sustainability.”

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Inequality

There is a lot of talk about executive pay now that Covid-19 has exacerbated the economic and social challenges in the country.

“There is undoubtedly an expectation that the private sector needs to work with other role players in creating a stable, viable economy through robust responses to ESG matters,” Horak says.

It is therefore important that the Just Transition, South Africa’s managed shift to a green, net-zero emission economy, must consider the economic effects of lost jobs that could make inequality even worse.

Most South Africans would like to see a living wage. The report indicates that 55.5% of South Africans were living below the upper-bound poverty line of R1,335 per month in 2021. The World Bank reported that the number of employed people in South Africa fell by nearly 1.5 million in 2020 and that wages of employed people fell by 10%–15%.

Only 40% of job losses had been recovered by July 2021 and according to Makhosazana Mabaso, director in PwC’s people and organisation division, many companies are now questioning whether they are paying their full-time employees enough to ensure they do not live in poverty.

South Africa’s National Minimum Wage is currently R21.69 for every hour worked, a monthly salary of R3,630, based on a 21-day work month of eight hours per day.

“It is clear that companies can do more to balance job creation with improving the lives of workers by committing to paying wages that meet employees’ minimum needs, lifts them out of poverty and allows them to live a dignified life,” Mabaso says.

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Environmental, social and governance issues

“Embedding ESG issues is now core to business strategy and success and not a ‘reporting issue’ to fix. Boards that are confident, well-informed of present and future risks and prepared to take courageous action in line with a well-defined purpose are what will take business and our economy forward,” Horak says.

Mabaso also points out that people are already tired of buzzwords and rhetoric about integrating of ESG concerns into executive pay and performance measurement, especially when nothing concrete can be observed at ground level.

“Now is perhaps an appropriate time for companies and boards to take a step back and perform an honest assessment of where they are in respect of ESG, where they would like to be and the steps they can take to get there,” Mabaso says.

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Profile of non-executive directors

According to the report, the total number of non-executive directors on the boards of active JSE-listed companies was 1,955 – 151 less than in 2021, with an average tenure of six years. The average director sits on a single board, with fewer than 50 sitting on four boards or more.

The average age of chairpersons is 64, while that of other board members is 58, demonstrating South African boards have a reasonable experience base and tenure profile, although the survey indicates that lack of experience of other board members still remains an area of concern.

Most (50%) non-executive directors were white and 40% black, 6% Indian/Asians and 5% coloured, while 68% were male compared to 71% in 2021.

Chairpersons were paid an average fee of R905,000, while lead independent directors were paid R723,000 and non-executive directors R620,000.