Owing to the poor performance of the South African and global economies, 2009 to 2012 were tough years for executives, with the realisation of, on average, a 4.3% increase in guaranteed packages (GPs), Khokela MD Laurence Grubb says.

In the company’s latest Directors Remuneration Report analysis for 2009 to 2014, it was revealed that CEO and executive GP increases over five years were, on average, 5.8% a year, marginally above the consumer price index (CPI) of 5.4% and well below public sector union negotiated increases of 8.6%.

“Companies had to reduce costs. They retrenched workers and had to be seen to be containing executive increases. Unions, on the other hand, were becoming more demanding in their negotiations.

“The public sector, in particular, received large increases that were significantly above the CPI. This cannot be sustained over a long period without impacting on inflation and the number of jobs available.”

The yearly bonuses received from 2009 to 2012 were also relatively low with less than 75% of executives receiving bonuses. For those executives that received a bonus, the amount equated to 25.3% of GP, while the poor economy also impacted on the majority of the companies, with incentives paid lower than the targeted incentives.

Long-term incentive (LTI) payments received were particularly hard hit, with only 15% of the executives receiving any such incentives. The average LTI cashed in equated to 53.9% of GP.

“Our research suggests that many LTI schemes were underwater, or the performance criteria set for vesting were not achieved. Hence, very few were able to cash in,” Grubb explained.

Meanwhile, the pay trend for nonexecutives saw a fairly constant increase over the last six years, averaging 6.8% for board chairpersons and 9.6% for nonexecutive directors on total fees earned.

The tenure of executives serving in the same role of their respective companies was analysed, and showed that 39% of executives remained at their company for five years and more, with the majority, 61%, serving for less than five years.
 
“This can be attributed to the fact that the life span of executives is generally short. Executives are normally fairly mature by the time they are appointed as executives and hence either retirement, the stress of the role, the desire from the board to bring in fresh blood or poor performance results in them moving on,” Grubb said.