Executives’ cash windfall raises poverty question in South Africa

A number of cases have sprung up over the past few years sparking widespread public outrage in marked contrast to the indifference displayed by the companies concerned.

Recent above-inflation salary increases highlight the vast wage discrepancies and this week, certain FirstRand Bank directors got a 22% salary increase.

In stark contrast, research from FinMark trust this week highlighted the fact that 78% of the country earns less than Rs3000 a month.

In 2001 Old Mutual CEO Mike Levett retired with a package of R150m, the main bulk of which were share options and pension. The following year it emerged that US national and South African Airways CEO Coleman Andrews had been paid R232m over a 34-month period at the helm of the airline, including pay of R100m, a share award equivalent of R59m and a termination payment of R74m.

In the case of Nedeor's controversial incentive scheme to pay 16 executives, a special bonus of R195m based on the share price increase of the bank's investment in Dimension Data, widespread outrage forced the bank to can the plan. Many executives consider this an unjustified fuss, and point out that in SA, CEOs are paid less than their foreign counterparts.

P-E Corporate Services recently completed an executive salary survey of 750 companies, illustrating that an average CEO earns 200 times that of a minimum wage workers.

SA is amongst the worst nations on this grading, showing an income disparity of 0,61 – double that of the UK and US. It is worse than South America and marginally behind Zimbabwe.

In February Mazwai Securities CEO Andile Mazwai warned that this disparity created the possibility of civil revolt. In an environment where the rich get richer and the poor poorer, “the have-nots will eventually take from the haves”.

The P-E survey also shows that a CEO of a large JSE Securities Exchange SA company typically earns between R1,6m and R2,4m a year.

With unemployment sitting at 30% of SA's economically active population and four-fifths of the population earning less than R3000 a month, exorbitant directors salaries are likely to be the cause of considerable unrest.