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

President Ramaphosa has signed a bill aimed at addressing financial inequality in the workplace.

The Companies Amendment Act was signed on Friday 26 July, making amendments to the Companies Act of 2008.

A follow-up Act, the Companies Second Amendment Act, was also signed by the President and gives the state greater powers to charge delinquent directors.

Improving salary transparency

Under the guise of making corporate business dealings more transparent, companies are forced to change their approach to remuneration.

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Companies must now disclose at their AGMs the difference between the salary packages of their top 5% earners and the earnings of the lowest 5%, as well as present a median average for the company.  

“The law addresses public concerns regarding high levels of inequalities in society by introducing better disclosure of senior executive remuneration and the reasonableness of the remuneration,” stated The Presidency.

The law will be applicable to all private and public companies, including State-owned entities (SOE), with public and SOEs required to prepare and present remuneration policies for shareholder approval.

Additionally, the Act requires the establishment of a social and ethics committee within every company that is to compile social and ethics policies and reports.

More legal muscle for government

The accompanying Act, the Companies Second Amendment Act, extends the period with which authorities can act against delinquent directors.

The Presidency claimed these Acts would help fight corruption and create better conditions to attract foreign investment.

“The new law extends the time bar for declaring a director of a company a delinquent director, from 24 months to 60 months,” explained The Presidency.

“It also gives the court the power to extend the period on good cause shown.” the statement added.

Minister of Employment and Labour approves

Nomakhosazana Meth, Minister of Employment and Labour expressed her department’s satisfaction with the signing of the Act.  

“Through our departmental inspectorate, we will promote, strengthen and enforce compliance of our labour laws, as we strive for a labour market that is conducive to economic growth,” said Meth.

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Minister Meth was recently in Brazil where she met her G20 counterparts, who addressed labour inequality in a joint statement.

“The only way to address this challenge properly is to abandon traditional models and responses, such as those favouring deregulation and market-based solutions, that have already been proven not to work.

“[We must] accept that an expansive social response must be consensual and shared,” said the ministers.