“BUSINESS leader Bobby Godsell has suggested SA establish an independent commission into executive pay. He said it was excessive and lacked transparency.”
“Speaking on Thursday at a panel discussion in Cape Town alongside Economic Development Minister Ebrahim Patel, Congress of South African Trade Unions general secretary Zwelinzima Vavi and Deborah Hargreaves, chairwoman of the UK High Pay Commission, Mr Godsell said he applauded the report of the UK commission and endorsed its recommendations. ”
“The UK commission is an independent body established to research executive pay. Among its recommendations are that executives be paid basic salaries with only one additional performance-related element; that the top 10 executive salaries of each company should be published; that executive remuneration committees have an employee representative; that shareholders cast “forward-looking” advisory votes on executive salaries, which will be binding for three years; and that fund managers and institutional investors disclose how they vote on remuneration.”
“Mr Godsell said: ‘Perhaps SA also needs a low-pay commission in the sense that we need as a society to think about what a household needs to sustain a minimum, decent existence. I don’t know what that number is but … the point is to have a debate about that number with the understanding it is aspirational’.”
“ARE the wages of unskilled workers in SA too high? This is an incendiary allegation, and when it was made a few weeks ago by economist Mike Schussler, Cosatu responded with the same vehemence that it might unleash on, say, people calling for something really dangerous such as a youth wage subsidy.”
“It seems hard to believe that people earning so little can be thought of as earning too much. I remember long ago former gold miner Bobby Godsell saying that anybody who thinks wielding a pick all day is ‘unskilled’ should try it for a bit and see how long they last.”
“But we live in a hard world of international competition, and labour cost is one aspect of that competition. The truth, as we know, can be inconvenient and its inconvenience should not be a bar to asking the question. So what exactly are the arguments?”
“Let’s start with the claim. As it happens, the allegation that SA’s unskilled workers are paid too much was just part of a much longer and more detailed set of arguments developed by Schussler for trade union Uasa as part of something called the 2012 South African Employment Report.”
“The report makes fascinating reading, and plots some of the most disturbing economic trends in life in SA as a democratic country. These include that SA’s industrial employment is now 40% lower than its peak in the third quarter of 1980 and down to about half that since the advent of democracy. More amazingly, the proportion of government employees to industrial employees has risen from 35% in 1960, to 70% in 1994, to 111% today. We are a country of bureaucrats rather than miners.”
“At the same time, public sector wages have increased extremely fast. Using 1980 as a base, by about 210% since then, while private sector wages have increased about 150%. A big chunk of that increase took place in the very recent past, as was the rise in the number of employees.”
“On a purchasing-power-parity basis, the starting salary of a teacher is now just lower than in Sweden, just higher than in Korea. Late-career teachers, however, get much less comparatively. Add in data from other sources, including Hay and Patterson scales, and it all points to Schussler’s final conclusion that the see-saw has tipped a bit too far in favour of the lower levels of the income profile. He’s not arguing for a dramatic reversal, but for tipping the scale in the other direction.”
“The ANC has been aggressively shifting the balance of wage rates, so the lowest paid get proportionally more.”
“And in fact, the difference between mean and median wages in SA is not that big. The Treasury estimates that the taxable income median is about R140000 a year, about 12% less than Schüssler and StatsSA’s average figure. If Malikane was correct, the total income of SA’s 9,1-million formal workforce would be around R120bn a year instead of the R1346bn StatsSA says it is.”
“This is just propaganda in a quasi-numerical form designed to pretend that SA’s workers are poorer than they are, to improve Cosatu’s wage-bargaining position. I don’t consider myself anti-union at all; if employers are callous, the result will be workplace unrest. Unions are necessary to improve workplace equity and communication and to balance employees’ and employers’ requirements.”
“Deborah Hargreaves, the chairwoman of the UK High Pay Commission, says SA faces the same set of problems as Britain with executive pay having ballooned over the past 30 years to unjustifiable levels.”
“However, income disparities in SA appeared to be starker, more extreme and posed more of an immediate threat to social stability.”
“Ms Hargreaves was head of the year-long UK commission, which was established and funded independently by government and business and delivered its report in November last year. She was in SA last week at the invitation of Economic Development Minister Ebrahim Patel.”
“Executive pay has become increasingly controversial in SA, with organised labour refusing to entertain wage restraint in the face of excessive pay for bosses.”
“Mr Patel hopes to broker ‘an incomes accord’, which will set limits on executive pay and wages of those earning more than R3000 a month. Big business — under the auspices of Business Leadership SA — has agreed to draw up a code of conduct for its members on executive remuneration.”
“However, three key recommendations made by the commission have not been adopted by the UK government. The first is for the simplification of pay packages of executives into a basic salary plus one additional performance-related element.”
“Executive packages have been loaded up with so many share awards, bonuses, pension payments and payments in lieu of pension and have become so complicated that you can’t work out what people are getting.”
“’Plus, these are hardly incentivising management as executives don’t really understand some of these share programmes and how they will pay out. These were meant to align executives interests with shareholders, but it hasn’t really worked. In 2010, 98% of directors got their bonuses — that is not a bonus that is just an extension of pay,’ Ms Hargreaves says.”
“The commission’s recommendation for an employee representative on a remuneration committee has also not been taken on board by government and is strongly objected to by business.”
“Its recommendation that government establish a centre to monitor high pay — given the disputes over what executives actually earn — is a third recommendation that the UK government does not plan to act upon.”
“‘What government has done is an important first step, but the measures will not be effective on their own. So we still need to keep the pressure up,’ she says.”
Two important and interesting articles first appeared in Business Day today.
The first by Carol Paton – #1SA needs UK-style high pay panel — Godsell and the other by
Tim Cohen – #2Cosatu like French beet farmers on SA ‘low wages’
Random extracts are included with permission of Business Day but the two articles should be read by clicking on the links or going to Business Day.
A number of posts have been included in this blog and will be found by searching the website for ‘income differentials’ for example – EEA proposed amendments: Unfair discrimination – pay and conditions of employment.
#1SA needs UK-style high pay panel — Godsell
“BUSINESS leader Bobby Godsell has suggested SA establish an independent commission into executive pay. He said it was excessive and lacked transparency.”
“Speaking on Thursday at a panel discussion in Cape Town alongside Economic Development Minister Ebrahim Patel, Congress of South African Trade Unions general secretary Zwelinzima Vavi and Deborah Hargreaves, chairwoman of the UK High Pay Commission, Mr Godsell said he applauded the report of the UK commission and endorsed its recommendations. ”
“The UK commission is an independent body established to research executive pay. Among its recommendations are that executives be paid basic salaries with only one additional performance-related element; that the top 10 executive salaries of each company should be published; that executive remuneration committees have an employee representative; that shareholders cast “forward-looking” advisory votes on executive salaries, which will be binding for three years; and that fund managers and institutional investors disclose how they vote on remuneration.”
“Mr Godsell said: ‘Perhaps SA also needs a low-pay commission in the sense that we need as a society to think about what a household needs to sustain a minimum, decent existence. I don’t know what that number is but … the point is to have a debate about that number with the understanding it is aspirational’.”
#2Cosatu like French beet farmers on SA ‘low wages’
“ARE the wages of unskilled workers in SA too high? This is an incendiary allegation, and when it was made a few weeks ago by economist Mike Schussler, Cosatu responded with the same vehemence that it might unleash on, say, people calling for something really dangerous such as a youth wage subsidy.”
“It seems hard to believe that people earning so little can be thought of as earning too much. I remember long ago former gold miner Bobby Godsell saying that anybody who thinks wielding a pick all day is ‘unskilled’ should try it for a bit and see how long they last.”
“But we live in a hard world of international competition, and labour cost is one aspect of that competition. The truth, as we know, can be inconvenient and its inconvenience should not be a bar to asking the question. So what exactly are the arguments?”
“Let’s start with the claim. As it happens, the allegation that SA’s unskilled workers are paid too much was just part of a much longer and more detailed set of arguments developed by Schussler for trade union Uasa as part of something called the 2012 South African Employment Report.”
“The report makes fascinating reading, and plots some of the most disturbing economic trends in life in SA as a democratic country. These include that SA’s industrial employment is now 40% lower than its peak in the third quarter of 1980 and down to about half that since the advent of democracy. More amazingly, the proportion of government employees to industrial employees has risen from 35% in 1960, to 70% in 1994, to 111% today. We are a country of bureaucrats rather than miners.”
“At the same time, public sector wages have increased extremely fast. Using 1980 as a base, by about 210% since then, while private sector wages have increased about 150%. A big chunk of that increase took place in the very recent past, as was the rise in the number of employees.”
“On a purchasing-power-parity basis, the starting salary of a teacher is now just lower than in Sweden, just higher than in Korea. Late-career teachers, however, get much less comparatively. Add in data from other sources, including Hay and Patterson scales, and it all points to Schussler’s final conclusion that the see-saw has tipped a bit too far in favour of the lower levels of the income profile. He’s not arguing for a dramatic reversal, but for tipping the scale in the other direction.”
“The ANC has been aggressively shifting the balance of wage rates, so the lowest paid get proportionally more.”
“And in fact, the difference between mean and median wages in SA is not that big. The Treasury estimates that the taxable income median is about R140000 a year, about 12% less than Schüssler and StatsSA’s average figure. If Malikane was correct, the total income of SA’s 9,1-million formal workforce would be around R120bn a year instead of the R1346bn StatsSA says it is.”
“This is just propaganda in a quasi-numerical form designed to pretend that SA’s workers are poorer than they are, to improve Cosatu’s wage-bargaining position. I don’t consider myself anti-union at all; if employers are callous, the result will be workplace unrest. Unions are necessary to improve workplace equity and communication and to balance employees’ and employers’ requirements.”
“UK High Pay Commission head says public anger fuelled by financial crisis”, writes Carol Paton in Business Day.
It is recommended that the full article in Business Day be read by clicking on the links.
With the permission of Business Day here are some random extracts from the article by Carol Paton published for the first time in Business Day yesterday – Executive pay issue motivates social unrest.
“Deborah Hargreaves, the chairwoman of the UK High Pay Commission, says SA faces the same set of problems as Britain with executive pay having ballooned over the past 30 years to unjustifiable levels.”
“However, income disparities in SA appeared to be starker, more extreme and posed more of an immediate threat to social stability.”
“Ms Hargreaves was head of the year-long UK commission, which was established and funded independently by government and business and delivered its report in November last year. She was in SA last week at the invitation of Economic Development Minister Ebrahim Patel.”
“Executive pay has become increasingly controversial in SA, with organised labour refusing to entertain wage restraint in the face of excessive pay for bosses.”
“Mr Patel hopes to broker ‘an incomes accord’, which will set limits on executive pay and wages of those earning more than R3000 a month. Big business — under the auspices of Business Leadership SA — has agreed to draw up a code of conduct for its members on executive remuneration.”
“However, three key recommendations made by the commission have not been adopted by the UK government. The first is for the simplification of pay packages of executives into a basic salary plus one additional performance-related element.”
“Executive packages have been loaded up with so many share awards, bonuses, pension payments and payments in lieu of pension and have become so complicated that you can’t work out what people are getting.”
“’Plus, these are hardly incentivising management as executives don’t really understand some of these share programmes and how they will pay out. These were meant to align executives interests with shareholders, but it hasn’t really worked. In 2010, 98% of directors got their bonuses — that is not a bonus that is just an extension of pay,’ Ms Hargreaves says.”
“The commission’s recommendation for an employee representative on a remuneration committee has also not been taken on board by government and is strongly objected to by business.”
“Its recommendation that government establish a centre to monitor high pay — given the disputes over what executives actually earn — is a third recommendation that the UK government does not plan to act upon.”
“‘What government has done is an important first step, but the measures will not be effective on their own. So we still need to keep the pressure up,’ she says.”