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27 November 2018

Fair and responsible executive remuneration: Just Share’s submissions on the 2018 Companies Amendment Bill

On 21 September 2018, the Department of Trade and Industry published the Companies Amendment Bill, 2018 for public comment.

Just Share supports the inclusion in the Companies Act of a requirement to prepare a three part directors’ remuneration report for each financial year. The report would consist of a background statement, an overview of the main provisions of the company’s policy on remuneration, and an implementation report. This amendment reflects the requirements of the King IV Report on Corporate Governance for South Africa (King IV).

However, King IV goes further, emphasising 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”.

In a country which is regularly touted as the most unequal in the world, information about the lowest paid workers of listed companies would provide valuable insights into inequality. 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 satisfactory standard of living, and giving them a chance to lift their families out of poverty.

Just Share has therefore submitted that, in order to align with King IV and with global best practice, the Companies Act should mandate more specific disclosures which provide context to the remuneration report. These disclosures should include:

  • how the remuneration policy is deemed to be fair and responsible in the context of overall employee remuneration;
  • an explanation of how the salary and employment conditions of the company’s employees other than the directors were considered when setting the policy, including whether, (and if so, how), the company consulted with employees, and whether any remuneration comparison measures were used;
  • the difference in the company’s policy on the remuneration of directors and that of other employees;
  • whether any views of the shareholders were taken into account in the formulation of the remuneration policy; and
  • the remuneration of those employees in the bottom 10% of the company’s salary range, and how many employees fall within this category.

You can see Just Share’s full submission here: Just Share NPC_Submissions on Companies Amendment Bill