Pay gap: These CEOs earn on average 597 times what lowest paid workers earn

Chief Executive Officers (CEOs) in the Johannesburg Stock Exchange (JSE) listed wholesale and retail sector earn on average 597 times what the lowest-paid workers in the sector earn, new research has found. The average lowest-paid worker in the sector would need to work for 21 months to earn what an average CEO in this sector earns in one day. The pay gap is huge.

New research by Just Share, an activist organisation for better climate outcomes and less inequality, analysed the most recent public disclosures of ten JSE-listed companies in the wholesale and retail space. The research highlights significant pay gaps and poor levels of diversity at the board and management levels.

The ten companies are Shoprite Holdings, Pick n Pay, Pepkor Holdings, The Foschini Group, Woolworths, Mr Price Group, Dis-Chem, Clicks Group, Truworths International and Spar Group. Together these companies employ 389 766 full-time staff and account for R833.7 billion in yearly revenue.

Kwanele Ngogela, senior inequality analyst at Just Share, points out that the wholesale and retail sector is the second-largest employer in South Africa after government, employing about 17% of the workforce.

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Woolworths pay gap: CEO earns 1 308 times what the lowest paid worker earns

The average unweighted ratio between total CEO remuneration and total lowest earner’s remuneration is 597, with the highest ratio 1 308 for Woolworths, according to the research. Woolworths’ internal minimum wage of R93 600 per year is significantly higher than that of its competitors and 57% higher than the 2023 sectoral determination figure of R59 483 per year.

However, this is offset by the largest CEO remuneration package of R122 468 000. Ngogela says at its 2023 annual general meeting Woolworths struggled to respond to a shareholder question about how it considers the CEO’s single-figure remuneration to be “fair and responsible”.

“While the sector undoubtedly plays an important role in providing employment to low- and semi-skilled workers, it is nevertheless crucial to also recognise the contribution of these extreme vertical wage gaps which characterise these companies to the country’s overall high levels of inequality.”

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Companies Amendment Act will make disclosure of pay gap compulsory

The Companies Amendment Act which the president recently signed into law will likely be proclaimed soon and it will make vertical pay gap disclosure mandatory for public and state-owned companies, requiring them to disclose:

• Every director and prescribed officer in the company’s total remuneration
• Employees’ total remuneration with the highest and lowest total remuneration
• The average total remuneration of all employees, median remuneration of all employees
• The remuneration gap reflects the ratio between the total remuneration of the top 5% highest paid employees and the total remuneration of the bottom 5% lowest paid employees.

However, Ngogela says, the Amendment Act does not include requirements for gender pay gap disclosure, despite calls for it to do so over several years of public participation processes. “This is a missed opportunity which should be prioritised in future legislation.”

ALSO READ: New Act forces companies to disclose salary gap between highest and lowest earners in SA

Board representation

Ngogela also points out that the sector’s performance on gender and racial diversity at board and top management levels is mixed, with disappointingly low targets set by several of these companies.

All companies listed on the JSE are required by law to promote gender and race diversity at the board level. Unfortunately, many companies still fall short, he says.

“Clicks stands out as the only company where black individuals make up the majority (60%) of the board, followed by Spar with 50% black representation. The wide range in target ambition, from Truworths’ very low 30% ACI representation target to the still-modest highest target of 50%, is hard to understand. The targets in the lower range suggest a particularly lacklustre commitment to transformation.”

Women make up 46% of the economically active population (EAP) and the research shows that Pepkor is the only company where the board is representative of the EAP in terms of gender. Clicks and Spar both achieved 40% female representation. Shoprite, Woolworths and Mr Price have higher targets (40%), although they have not met them.

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Management representation

The Employment Equity Act requires employers to implement affirmative action measures to achieve diversity and equity in their workforce. The Act also requires companies to disclose the breakdown of race and gender representation for top and senior management, although several companies did not provide this information, Ngogela says.

“Diversity and transformation in top and senior management is crucial for succession planning to ensure that the next cohort of leaders of these companies is more representative than current leadership of the country’s diversity.”

He says the current legislation does not impose transformation targets and instead relies on companies to develop their employment equity plans and set diversity targets and timelines to achieve reasonable progress towards employment equity.

However, Ngogela says, this approach has failed to drive meaningful change, especially in key strategic and management roles in this sector.

“Poor levels of representation of women and black people in top management roles, which are consistently lower than at the board level, suggests that equitable representation in the workplace may not be a primary focus in these companies. The Foschini Group is the exception when it comes to female representation.”

ALSO READ: Gender inequality: More females needed in the business world

Disclosure of employment equity data still inconsistent

Ngogela says the disclosure of employment equity data is still sporadic, inconsistent and incomparable, while some companies ignore legislative guidelines on how this data should be reported.

“Pepkor, for example, does not report employment equity data. Dis-Chem, Pick n Pay and Woolworths report only aggregated figures and several companies do not disclose female representation in top management at all.”