Warnings over 'unchecked' executive pay in South Africa

5 min read
Executive remuneration in South Africa is untethered to any objective measure of fairness, say investment researchers at Just Share.
On 17 September 2020, Sanlam announced that it had awarded newly-appointed CEO Paul Hanratty a share-based remuneration package potentially worth between R161 million and R500 million.

Just weeks into his appointment, Hanratty was awarded three million Sanlam shares at zero cost, and is tagged to get another two million within a few years. He will own the shares in five years if the company attains certain performance targets.

These targets will not be revealed to shareholders until the company releases its annual report next year. In the meantime, Hanratty will receive dividends on these shares as if he already owned them.

In response to the announcement, Bishop Jo Seoka of Active Shareholder suggested that Sanlam executives must despise their customers. The sentiment is indicative of a widening gulf, in both wealth and values, between the top 0.1 percent and the rest of the country, many of whom are customers of companies like Sanlam.

While Sanlam's egregiously generous gift to Hanratty is shocking, it is also not a surprise. South African companies have a global reputation for the bloated remuneration of their senior executives. Sanlam's announcement is simply the latest example of a company completely out of touch with the context in which it operates.

This phenomenon, unchecked by government or institutional investors, is one of the reasons why South Africa's wage inequality is one of the highest in the world, and has in fact increased since the end of apartheid.

For at least the past twenty years, the directors of listed companies have dished out enormous financial rewards to executives, while the remuneration of the lowest paid employees in their organisations has remained largely unchanged.

The justification for these rewards is that they attract scarce talent and ensure outstanding performance from the companies. It is becoming increasingly difficult to accept this excuse in light of recent events at Steinhoff, Tongaat, Nampak, Woolworths and…
Read full article