With the growing inequality between organisations’ top brass and their general workforce under intense scrutiny, consulting and advisory firm Deloitte has found that increases to CEOs’ guaranteed pay over the last five increase periods has exceeded inflation by a considerable margin, with significant yearly cash bonuses – in relation to guaranteed pay – also paid to CEOs and CFOs over the last six years, according to the firm’s Executive Compensation Report.

“Our analysis uncovered some key trends that, in our view, definitely provide vitriol to the debate, and are not well addressed in the disclosure within remuneration reports, which provide little or no explanation as to the cause or reason for these trends,” notes Deloitte actuarial, rewards and analytics leader Leslie Yuill, pointing out that guaranteed pay levels for CEOs is one of those trends.

Apart from consistently outstripping inflation, the Deloitte study, a detailed benchmark analysis of six years of top executive pay in relation to company performance, has found little apparent correlation between CEOs’ guaranteed pay and the size and complexity of the organisation they are charged to lead.

In the case of CEOs, the Deloitte analysis identified just 15% of instances where an incentive was not paid over the last six years. In the case of CFOs, instances in which bonuses were not paid were even rarer at 9%. 

Another issue explored in the Deloitte study is the alignment between executive pay, shareholder value and company performance.

“Through the last six years, executive pay growth is broadly in line with growth in shareholder value creation, but has generally outstripped growth in turnover and headline earnings,” says the report.

However, the mining, construction and resources (MRC) sector appears to be the exception to the apparent logic.

“Whereas the other sectors have doubled or trebled shareholder value, the MRC sector has destroyed value, to the extent of approximately a third. Despite this, the impact on MRC executive pay has not been dramatic, and shareholder and company misfortune has not correlated with executive pay.”

Another key observation from the study is that remuneration governance and disclosure, bar some shining examples, still has a way to go to ensure that the dialogue is elevated from the acrimonious debate that currently seems to prevail.

“Deloitte is of the view that stakeholders in South Africa require a balanced overview of the recent past to prepare for and inform the debate on the future. There is a need to establish a benchmark of the past and to provide a road map for the future to all stakeholders,” says Yuill.