Executive pay shoots up from sublime to the ludicrous
February 18, 2005
 By Renée Bonorchis
Executive pay in South Africa is far from modest. Whether companies are doing well thanks to external factors or thanks to a chief executive's hard work and vision, the pay levels out there are going through the roof.
Interestingly, the UK-listed companies with secondary listings in South Africa appear to be more tempered when it comes to remuneration - a clear indication that shareholder activism is working in the UK and a sign that it's far from being effective in South Africa.
Only the Public Investment Commissioners and Frater Asset Management appear to give a damn.
Other shareholders are unfazed about how much they are paying their employees to run their companies. Of course, this may be because the only people who can afford to be significant shareholders in South Africa are highly paid executives.
A few weeks back, one asset manager, when asked if he examined executive pay levels, said: "No, but I probably should, hey?" Yes! It's a no brainer.
But executives here will tell you that far too much is being made of executive pay. Well - that's akin to talking your own book.
Logically, if executive pay continues to outstrip company performance and you plot it along a straight line graph, then 10 or 20 years from now remuneration levels will be so far removed from reality as to be ludicrous. And don't think I'm suggesting that they aren't already ludicrous.
In the stories that roll out on this topic in the weeks to come we're hoping to highlight the anomalies and the successes, the guys unfairly coining it and the people who are measured in their approach to money.
One of our contentions when working on this project was that an unintended consequence of executive pay disclosure was the spiralling upwards of remuneration levels.
Our intended consequence of examining this issue was that shareholders would speak out more and executives would rein in their pay a bit.
We hope that one of our unintended consequences won't be the increase in executive pay levels since chief executives will now have an even clearer view of what their peers are earning. RB
Black empowerment The draft codes of good practice on broad-based black economic empowerment are still being digested by the interested parties, which may be why we haven't heard too many howls of dismay yet.
But, at this early stage, it is extremely difficult to imagine how the government believes the scorecard approach outlined in this draft document will promote broad-based empowerment.
If there are any restrictions attached to the economic interests involved in an empowerment deal, then the company that is the subject of the empowerment gets no ownership score.
A restriction will be deemed to exist if the acquisition of the equity interest was financed in whole or in part by a loan or if it was purchased on credit.
This suggests that companies will only score it they give away equity stakes, which does smack of expropriation. In the absence of a willingness to give away significant equity stakes, it is inevitable that companies will only want to deal with black people who have the resources to pay for equity stakes up front.
This means that in future we will see an awful lot more of the faces that keep cropping up in empowerment deals.
So much for broad-based black economic empowerment, or could it be that the government's idea of broad-based black empowerment is having 15 Mzi Khumalos and not just one?
And we all thought the government wanted to see black people across the country benefit from empowerment, but now it seems they just want to develop their own little coterie of hugely wealthy individuals, presumably to fall back on to help finance the odd election.
Perhaps we will learn more about it all from Tokyo Sexwale's new television programme, which is a South African version of The Apprentice and apparently will not be called Rent Seekers. AC
Woolworths Is this clothing, household and food retailer becoming more of a food retailer than anything? If the increased presence of the group's food business over the last few years is anything to go by, one could easily think that this is indeed the case.
This is even more true if one considers the not-so-good performance of its traditional clothing business in past years.
In the six months to December, the food division contributed R2.75 billion to turnover, compared with the R2.69 billion of clothing and home. And going by past performance, it's highly likely that the food division will continue to catch up ground on the clothing business.
As for the latest interim results, Woolworths said it did not focus enough on its classic clothing range, while prices in the children's wear department were also too high.
But some analysts said the group had read fashion trends wrong. One analyst said the prolonged below-market performance from clothing made him wonder whether there was a deeper underlying problem at play.
The risk for Woolworths, of course, is that competitors start infringing on the group's type of offering of clothing and apparel. There are already rumblings in the market that this is indeed the case. DDV
Umgeni Water This parastatal has recently opened a strategic stakeholders department to manage all publicity and media queries. It is an idea that will streamline the flow of information and image going out to the public.
Where previously the status quo was for media to speak to the head of a department for information concerning that department, no department heads are now allowed to speak to the media.
Although the system might have experienced some hiccups in getting off the ground, it would appear that the manager, Shami Harichunder, is in control of the situation.
An ex-journo himself, Harichunder is strongly aware of the frustrations experienced when information is not readily forthcoming from a source, and the negative image that an organisation takes on when it does not appear properly organised.
Hopefully, this signals a new phase in Umgeni's colourful history, both in terms of news and finances. NM
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