A new report that shows South African business executives in the Top 100 companies earn on average R17.9 million a year or close to R70 000 a day, with above-inflation salary hikes, was released by accounting firm Deloitte yesterday.
The report also revealed that “executive guaranteed pay increases in general have well exceeded inflation” in the last five years.
The report immediately sent shockwaves throughout the country’s trade union movement, and political economist Patrick Bond described it as “obscene”. The first to fire the salvo was the new 700,000-member South African Federation of Trade Unions (Saftu), which described it as appalling.
“If that is the average, there must be many who receive even more,” Saftu’s spokesperson Patrick Craven said yesterday.
Saftu argued that the situation would render South African society, which is already among the world’s most unequal, to grow even more unequal every day. The federation, with at least 24 trade union affiliates, said that the inequality in South Africa was creating a ticking time bomb.
“Many of these companies who are paying these grotesque amounts to their executives are the very same ones which, for instance in the engineering sector, are demanding that the trade unions agree to lower wages and working conditions for their workers,” Craven said.
Craven said some of the large firms that paid the exorbitant salaries and bonuses to their executives were the same ones that outsourced services, used labour brokers and retrenched staff in order to increase their profits and throw more workers into poverty.
“Yet it is the workers whose labour creates these companies’ profits from which the excessive pay for executives is financed.”
Wits political economist Patrick Bond said: “The income differential is obscene – when 63% of the population lives below the poverty line. But given the world-leading corporate corruption rates, as measured by PricewaterhouseCoopers, it’s also vital to ask whether these men have come by their wealth honestly,” Bond said.
“Most haven’t; they were complicit in a crime against humanity – apartheid – or they engaged in unethical or anti-competitive illegal behaviour since then,” he said.
The latest Deloitte study, which would surely bring the debate on the high salaries of chief executives in the private sector back on the table, found little correlation between CEOs’ guaranteed pay and the size and complexity of their organisation — particularly for companies with a market capitalisation of between R5 billion and R50 billion.
Deloitte’s actuarial‚ reward and analytics leader‚ Leslie Yuill, said that companies’ remuneration reports often “provide little or no explanation as to the cause or reason for these trends”.
“Cases in which companies declined to pay incentives were the exception‚ rather than the rule. In the case of the CEO‚ we only identified 15% of instances where an incentive was not paid over the last six years. In the case of CFOs, instances in which bonuses were not paid were even rarer, at 9%. It is almost as if executives are entitled to expect a reasonable performance bonus even when not warranted by performance,” Yuill said.
He said the disparity in levels of top executive pay in relation to those of the lower-paid workers is a societal concern worldwide. “This is particularly the case in South Africa‚ with its additional transformational needs and high levels of unemployment‚ which contribute to a powder keg of potential dissent and disharmony,” Yuill said.
Craven said inequality had already manifested in angry and often violent protests in the country’s townships. Though they may have specific local issues, these protests are a reflection of a growing feeling among the majority of people that they are excluded and marginalised from the economy.