For South Africa, changes to legislation carry more significance than other regions, particularly because pay gap has been a historical challenge and a contributor to the country’s inequality. For this reason, Department of Trade, Industry and Competition has published the Draft Companies Amendment Bill to make the disclosure of the pay gap between director’s and workers an obligation in state-owned and publicly-listed companies.
Ever since the corporate scandals of the early noughties surfaced, there has been huge spotlight on executive remuneration as part of good corporate governance, with calls for regulation to keep it in check in different jurisdictions globally. While there has been a great level of the awareness to do something about it, this has been a huge borne of contention. On the hand, proponents feel astronomical executive pay is justifiable in a world in which executives are most after sought, and on the other, opponents posit that it perpetuates the yawning gap between the have’s and have-nots.
A historical challenge in South Africa
South Africa is doing is part to keep abreast of the world’s best practice. Minister of Trade, Competition and Industry, Ebrahim Patel, says that, for South Africa, changes to legislation carry more significance than other regions, particularly because pay gap has been a historical challenge and a contributor to the country’s inequality. For this reason, Department of Trade, Industry and Competition has published the Draft Companies Amendment Bill to make the disclosure of the pay gap between director’s and workers an obligation in state-owned and publicly-listed companies. The Information will be published in annual reports and financial statements.
Key Policy objectives
In a nutshell, the Bill aims to achieve the following key policy objectives:
- Providing greater transparency on wage ratios at firms. The bill will potentially ensure stronger shareholder governance when it comes to excessive director pay for companies. Shareholders and stakeholders wll also be more aware of unsustainable pay discrepancies.
- Improving the ease of doing business; and
- True or beneficial ownership of companies and, by extension, money laundering challenges.
However, it is important to note that the Bill does not prescribe what the wage ratios between executives and workers . Instead, it promotes transparency, which can empower shareholder voting to be more effective than currently.
The public will have 30 days to comment. The bill will then go to Cabinet for approval, before being sent to Parliament, which will hold separate public hearings on it. An earlier version was first approved in 2018. However, following consultations with stakeholders part of the National Economic Development and Labour Council and Business Unity South Africa (BUSA), further changes were proposed.
