Finance minister Pravin Gordhan has called on businesses to rethink executive salaries and fat bonuses because of the economic crisis, glaring pay gaps and sky-high unemployment.
Speaking at a Business Unity SA (Busa) meeting on Monday, Gordhan said: “Remuneration links to the whole debate around inequality and I think there isn’t enough coming from business at this time. If this is not recognised by business, excessive bonuses and huge salaries will have a damaging effect.”
Gordhan told corporate leaders that business
confidence would be dented in the process.
He is the second government minister to call for restraint in the remuneration of executives.
Economic Development minister Ebrahim Patel’s New Growth Path, released last year, called for businesses to freeze the salaries and bonuses of people earning more than R550 000 a year, and to limit to the inflation rate pay increases for anyone earning more than R20 000 a month.
Cosatu has weighed in on the debate, saying high executive salaries could not be justified.
The pay of executives came under the spotlight in the past few months when it was reported that:
Shoprite CEO Whitey Basson took home R627,53 million last year, or R2,5 million a day;
Transnet’s former acting CEO, Chris Wells, was the highest-paid director of a parastatal last year with a R10,68 million package;
Absa CEO Maria Ramos was paid R6,5 million last year, as well as a director’s fee of R38000 and a performance bonus of R4,55-million, bringing her annual pay to R11,1 million; and
Sizwe Nxasana, CEO of FirstRand, earned R12,3 million last year.
A report released in July showed that the average pay of executive directors of the top 40 JSE-listed companies increased last year by 23,3% to R4,8 million.
Standard Bank CEO Jacko Maree is the only South African executive known to have voluntarily taken a pay cut to help the poor. In September, he announced he would give 10% of his income to help educate needy pupils.
Gordhan’s spokesman, Bulelwa Boqwana, said it could not be right that, in a country rated as having one of the most unequal societies in the world, senior managers’ salaries increased while fewer people had jobs.
She said Gordhan was speaking “in the context of gross inequalities within society”.
“If you look at the lower staff, there is such a glaring pay gap,” she said.
Cosatu welcomed Gordhan’s call. Spokesman Patrick Craven said that if executives sacrificed some pay, more people could get jobs.
“We totally agree that executive pay is ridiculous. It is not justified by any standard. The money could be used to improve the (living) standards of other South Africans. We are lining the pockets of people who are already rich.”
However, Efficient Group economist Dawie Roodt said though he agreed with Gordhan on most issues, this time the minister had missed the mark.
“On this, I vehemently disagree with him. Most of the taxes come from the people he is attacking. They are well paid because there is a huge scarcity of skills in South Africa.”
Business Unity deputy CEO Raymond Parsons said: “Busa has already recognised the importance of executive pay in the economic debate. This issue will be discussed as part of the New Growth Path process.”