SA corporates need to address the big wage gap between CEO’s and workers

Johannesburg Stock Exchange on Gwen Lane, Sandown, Sandton.

Several JSE-listed companies have started to make some disclosure relating to wage gaps and internal minimum wages, but their ways of doing so differ, making comparisons difficult, the shareholder activist organisation Just Share said yesterday.

It yesterday released information on the pay gaps at eight listed companies, Absa Group, Investec, JSE Limited, Nedbank Group, Old Mutual, Shoprite Holdings, Standard Bank Group and Woolworths Holdings.

Wage gap disclosure is not yet a legal requirement in South Africa, but the companies voluntarily released information for the Just Share analysis. As one of the most unequal countries, labour market inequality is the largest contributor to income inequality.

Statistics SA has said: “The labour market remains one of the key institutions through which exceptionally high levels of both vertical and horizontal inequality are transmitted.”

As such, listed companies need to end their resistance to wage gap disclosure, Just Share said.

Its analysis showed that among these companies, the largest wage gap was at Shoprite, where the CEO in 2022 earned 1081 times more than a worker earning the company’s minimum wage if that worker worked 45 hours per week for all 52 weeks of the year, earning about R58 700.

In the US, according to a BR online search, the ratio of CEO-to-typical-worker compensation was 399-to-1 in 2021, which was up from 366-to-1 in 2020, and a big increase from 20-to-1 in 1965 and 59-to-1 in 1989.

The smallest wage gap in the Just Share analysis was at the JSE, where the CEO in 2022 earned 49 times more than the disclosed “lowest grade total guaranteed pay” of R419 585.

The pay gap for Old Mutual was 133 times, 176 for Nedbank, 230 for Absa, 258 for Standard Bank, and 423 for Woolworths.

The minimum salary at Standard Bank Group was R215 700 per annum for the fixed pay of unionised general employees, while for Absa, the minimum cost-to-company was R200 000 a year.

The CEO single-figure remuneration between the eight companies varied between the lowest at R20.67 million for the JSE and the highest, R63.46m for Shoprite.

However, the companies were using a wide range of formats and including different elements of remuneration in their pay gap analysis.

While the listed companies assessed referred to their internal minimum wage / minimum annual guaranteed package / minimum salary, none of the companies said what the lowest grade job was that attracted the minimum salary.

“For Woolworths and Shoprite, the hourly base pay presumably applies to those working in the retail outlets. It is not obvious in other sectors, however, what the lowest grade job is, which means that it is unclear whether these minimum packages apply to unskilled workers,” Just Share said.

When assessing the “fairness” of their lowest wages, most companies compared these wages to the statutory national minimum wage rather than to the fairness of overall remuneration within the organisation, as required by King IV or to a living wage.

In addition, the use of CEO total guaranteed pay rather than CEO total remuneration to calculate pay ratios obscured the fact that the major portion of executive remuneration was derived from short-term and long-term incentives.

“It is encouraging to see some companies – Nedbank, Old Mutual and Investec – are calculating pay gaps using total remuneration,” Just Share said.

A common argument against pay gap disclosure in South Africa is that this will be “taken out of context” or “misinterpreted”.

While there are important differences between sectors which impact levels of pay, “Just Share believes stakeholders can make their own assessments of fairness on a case-by-case basis and that this disclosure is a crucial first step in understanding and addressing the high labour market inequality that is so damaging to our economy and society,” it said.

There is currently no prescribed method for the public disclosure of pay ratios in South Africa.

Pay gap disclosures are also necessary for increased transparency to empower investors to make informed decisions when exercising their voting rights on remuneration policy and implementation reports.

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