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Aug 13, 2012

Executives earn too much – business survey

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Africa|India|Africa|Brazil|China|Greece|Russia|South Africa|Corporate Finance|Jeanette Hern|June
Africa||Africa|||
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South African business owners believe that executives at large public companies were paid too much, a survey by Grant Thornton showed on Monday.

The International Business Report survey, which reviewed 2 800 public and private businesses in 40 countries in May and June, stated that 68% of South African business owners believed that executives earned too much.

The sentiment is shared by South Africa’s global and Bric counterparts in Brazil, Russia, India and China, scoring 66% and 70%, respectively.

“Consensus from business leaders around the globe is that executive compensation is too high, which pinpoints an important issue amidst challenging global economic circumstances,” said Grant Thornton South Africa partner and head of corporate finance Jeanette Hern.

The survey revealed a demand for greater oversight of business leaders, and transparency and accountability in public companies from both a local and global standpoint.

Separation of roles was also of considerable concern globally, with 90% of South African respondents saying that the roles of CEO and chairperson 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.

Eight-five per cent 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%), 10% higher than the global average.

“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,” Hern noted.

This is particularly 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 Greek counterparts that executive pay should be directly linked to performance, compared with almost 90% globally and 92% in Bric nations.

“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 concluded.

 

Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
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