Wealth

Here’s how much more money South African CEOs make than you do

Staff Writer

 ·26 Jun 2017

Deloitte has released its inaugural Executive Compensation Report, showing how South African executives measure up on pay versus performance across company size and sector.

The group found that increases to CEO guaranteed pay over the last five increase periods exceeded inflation by a considerable margin on a compound annual growth rate basis, and annual cash bonuses paid to the CEO and CFO over the last six years are considerable in relation to guaranteed pay.

Executive pay continues to attract intense media scrutiny both locally and abroad, with headlines on executive pay appearing on a frequent basis.

Deloitte found that the average executive, across all companies, earned a total pay package of R17.97 million a year.

“Our analysis uncovered some key trends that, in our view, definitely provide vitriol to the debate, and are, as yet, not well addressed in the disclosure within Remuneration Reports, which provide little or no explanation as to the cause or reason for these trends,” said Leslie Yuill, actuarial, reward and analytics leader at Deloitte.

Apart from consistently outstripping inflation, the Deloitte study found little apparent correlation between CEO guaranteed pay and the size and complexity of the organisation they are charged to lead.

This is particularly prevalent for organisations with a market capitalisation of between R5 billion and R50 billion.

Executive pay by company size

On the issue of annual incentives for CEOs and CFOs, the study found that these appear to be “contingent on” performance rather than aimed at “driving” performance. Cases in which companies declined to pay incentives were the exception, rather than the rule.

Another issue explored in the Deloitte study is the alignment between executive pay and shareholder value and company performance.

“Through the last six years, collectively as a group, executive pay growth is broadly in line with growth in shareholder value creation, but has generally outstripped growth in turnover and headline earnings” the report said.

But Mining, Construction and Resources (MRC) appears to be the exception. Whereas the other sectors have doubled or trebled shareholder value, the MRC sector has destroyed value, to the extent of approximately a third.

Despite this, “the impact on MRC executive pay has not been dramatic, and shareholder and company misfortune has not correlated with executive pay”.

Executive pay by industry