Executive pay is only of concern to employment lawyers when there are disproportionate pay differentials within an enterprise.  Designated employers, and there are many, must report regularly on the remuneration and benefits received in each occupational level of that employer’s workforce.  This is what is required by s 27 of the Employment Equity Act 55 of 1998 (EEA).  Designated employers ‘must take measures to progressively reduce such differentials’.  Designated employers are also obliged to create a solid framework based on seven occupational levels.  The progression from one step to the next must be the same to ensure proportionality and a straight-line economic cost curve for the enterprise.  Logically there should be three intermediate steps within each level, resulting in a total of 21 proportional ‘job grades’.

More to an executive’s pay package than meets the eye: Moyagabo Maake’s report in BDlive today published by Business Day.

Excerpts

EXECUTIVE remuneration has come under scrutiny in recent years, with company boards having to justify the attractive packages paid to CEOs and other senior management.

Shareholder activists, journalists and other interested parties go over annual reports with a fine-tooth comb looking for the highest-paid executives.  But it is hard to compare their pay packages just by adding up the “total remuneration” column in an annual report.

. . . . .

“It is indeed vexing to decipher and somewhat of an art,” says remuneration expert Mark Bussin, chairman of 21st Century Pay Solutions, of the banks’ remuneration reports.  “King IV is coming out strongly in favour of more transparent and simpler reporting.”

A draft of the King IV code on corporate governance released in March proposes a remuneration “disclosure benchmark” that enables comparative analyses among firms within the same peer group.

The problem appears to be that share options awarded during the year (which vest in later periods) as part of long-term incentive schemes are included in remuneration tables that are silent on the actual number of share options awarded.  Some do not specify vesting periods.

“Reporting on guaranteed remuneration and bonus awards including deferrals, is relatively consistent,” says Clinton Rodgers, Nedbank’s executive head for reward.