By Thandisizwe Mgudlwa
South African Executives are undeserving and underperforming fat cats.
And some 68% of South African business owners believe that executives at large public companies are paid too much, a sentiment that is shared by global and Brazil, Russia, India, China (BRIC) counterparts, which scored 66% and 70%, respectively.
This is according to a global survey of 2,800 public and private businesses in 40 countries in May and June 2012 as part of the Grant Thornton International Business Report survey.
Jeanette Hern, partner and head of corporate finance at Grant Thornton South Africa, says: “Consensus from business leaders around the globe is that executive compensation is too high, which pinpoints an important issue amidst challenging global economic circumstances.”
The survey revealed business leaders’ need for greater oversight, transparency and accountability in public companies from both a local and global standpoint.
The separation of roles was also of considerable concern globally, with 90% of South African respondents saying that the roles of Chief Executive Officer (CEO) and Chairman should be held by different people to ensure greater oversight, compared to 80% globally and 88% in BRIC countries.
For each question in the survey, South Africa scored higher than its global and BRIC counterparts, highlighting local business leaders’ significant concern over insufficient oversight measures and issues related to executive remuneration.
85% of South African business leaders agreed that shareholders should have greater involvement in establishing remuneration policies for senior executives at public companies, well ahead of the global response of 67%.
Again, most South Africans responded “yes” when asked whether large public companies should disclose the remuneration policy and individual remuneration of directors (87%), ten percent higher than the global average.
Hern states that: “Investors have been hurt by the crises and tough global economic conditions characterising the past five years.”
“They want to know how their money is being spent and whether executives’ remuneration is in line with performance,” she adds.
This is especially true in Greece, where 100% of business leaders surveyed said that remuneration should be closely linked to performance, unsurprising in light of the country’s economic collapse and ongoing sovereign debt crisis.
South Africa was not far behind with 96% of respondents agreeing with their Greek counterparts that executive pay should be directly linked to performance, compared to almost 90% globally and 92% in BRIC nations.
Hern concludes:“In South Africa and abroad, public companies will face growing scrutiny from the community, investors and industry. These businesses need to ensure that their policies are known, understood and transparent, and that reward can be justified by performance.” she concludes.