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Inequality

In South Africa, which is regularly touted as the most unequal country in the world, regulators and investors should be concerned about the differences in pay between senior executives and those in the lower salary ranges of an organisation.

Excessive executive remuneration has become a global symbol of inequality. The vast pay packages of boardroom bosses have stoked public anger and shareholder discontent, especially when these packages appear to be disconnected from the performance of the companies they run.

Fair and responsible remuneration

King IV emphasises that “the remuneration of executive management should be fair and responsible in the context of overall employee remuneration. It should be disclosed how this has been addressed. This acknowledges the need to address the gap between the remuneration of executives and those at the lower end of the pay scale”.

Disclosures providing information about directors’ remuneration would be much more useful if they were provided in the context of overall employee remuneration. This context would also enable shareholders to determine whether the remuneration of the lowest paid workers is a “real living wage”, allowing them to maintain a dignified standard of living.

What is a living wage?

A living wage can be defined as a socially acceptable minimum wage that seeks to ensure that employees are able to live in dignity. This includes being able to afford a balanced diet and provide children with a decent education. This is different from a minimum wage which is defined as a statutory minimum that all employers must pay.

Why advocate for a living wage?

A minimum wage can create a class of the “working poor”, i.e. people who are employed, but who do not earn enough to provide decent and dignified lives for themselves and their dependents. Failure to pay a living wage perpetuates the cycle of poverty.