21 st Century Executive Pay

Transcription

1 21 st Century Executive Pay Barometer (detailing the period from July 2016 December 2016) April

2 Introduction This is the 9 th edition of the Executive Pay Barometer. The South African economy has continued to be under pressure since the last issue of the 21st Century Executive Pay Barometer was released. During these times when businesses (and hence jobs) are under pressure, Executive pay practices are scrutinised more closely than in times of strong economic growth. The barometer uses publically available financial data (from listed companies financial and remuneration reports for the most recent 6 month period) to report on: Executive annual increases Executive variable pay ratios to total guaranteed pay: Short-term incentives Long-term incentives Prevalence of types of share schemes Executive remuneration components by company size Executive remuneration components by industry Wage gap analysis by company size and industry

3 Annual Total Guaranteed Package Increases (TGP) Across all Company Sizes and Industries 7.10% 7.00% 5.80% CEOs and CFOs received a median increase in excess of the headline inflation rate for Executive Directors received a median increase of just below 6%. All three types of executives received lower median increases than what was reported in the previous report.

4 Total Guaranteed Package (TGP) (median) By Company Size Executive Directors CFOs R R R R R R R R R CEOs CEOs continue to have the highest median TGP at each company size Although CFOs have a higher median TGP than Executive Directors at each company size, the difference between these two kinds of executives within the small and medium sized companies is negligible.

5 Wage Gap (Total Guaranteed Pay - between A, B and C band workers and CEOs) By Company Size The positive correlation between company size and the Wage Gap has continued in this edition of the report. There has been a slight reduction in the median Wage Gap of the small and medium cap companies. Conversely, the large cap companies have experienced an increase in their median Wage Gap. The Wage gap has been calculated by dividing the CEO Total Guaranteed Package (TGP) by the median of the A, B and C-band worker s (general staff) Total Guaranteed Package (TGP).

6 Short-Term Incentives (STI s) and Long-Term Incentives (LTI s) As a percentage of Total Guaranteed Pay (TGP) By Company Size Executive Directors 65% STI s 67% 35% LTI s CFOs 216% 88% 50% 174% 30% 17% 117% 130% 28% CEOs 32% 57% 97% 75% 149% 118% The LTI as a percentage of TGP for small cap CFOs has declined appreciably since the previous report was released. The STI as a percentage of TGP for CFOs have remained relatively unchanged. The pattern of the STI and LTI as a percentage of TGP for CEOs has remained relatively the same as in the previous report. The small cap Executive Directors experienced a decline in their LTI as a percentage of TGP ratio while large cap companies experienced the opposite change.

7 Prevalence of share schemes issued Overall Appreciation shares Full shares 30% 31% 28% 88% 84% 94% The pattern of the prevalence of each type of share instrument has remained fairly constant since the previous report was released. The current methodology allows for companies to use both classes of shares and as a result the sum of the two percentages can exceed 100%.

8 Prevalence of share schemes issued By Company Size Executive Directors Appreciation shares Full shares CFOs 13% 25% 42% 97% 16% 95% 81% 27% 44% 14% 80% 12% 94% 75% 86% 94% 95% CEOs 43% Large cap companies give the highest prevalence of full shares to all three kinds of executives. Medium cap companies received the lowest prevalence of full shares across all three kinds of executives.

9 Executive Remuneration The various industries that have been analysed in the Executive Pay Barometer have been grouped as follows: Extractive industries Agriculture Forestry & paper Mining Oil and gas Transformative industries Construction & building Utilities & energy Manufacturing Distributive services Transportation & logistics Communication Wholesale Retail Producer services Banking & financial services Insurance Real estate Engineering Accounting Consulting Legal services Miscellaneous services Personal services Domestic services Hotel Eating and drinking Repair services Laundry Barber & beauty services Entertainment & leisure Media & advertising Miscellaneous personal services Social services Medical & health services Hospital Education Welfare & religious services Non-profit organisations Postal services Regulators SETA s Miscellaneous social services

10 Wage Gap (Total Guaranteed Pay - between A, B and C band workers and CEOs) By Industry The Extractive Industry experienced an improvement in its Wage Gap ratio since the previous report was released. Conversely, the Distributive Services Industry has had an increase in its Wage Gap resulting in it having the largest industry wage gap in this report.

11 Executive Directors Short-Term Incentives (STI s) and Long-Term 68% Incentives (LTI s) As a percentage of Total Guaranteed Pay (TGP) By Industry 71% STI s CFOs 31% 54% 11% CEOs LTI s 50% 44% 170% 62% 30% 104% 131% 139% 109% 134% 125% 162% 214% 61% 46% 196% 130% 172% 200% 24% 74% 62% 54% 68% 124% CEOs in the Extractive and Personal Services Industries experienced a decrease in their median LTI as a percentage of TGP ratio. CFOs in the Extractive and Transformative Industries experienced a decrease in their median LTI as a percentage of TGP ratio. The CFOs in the Transformative and Distributive Services Industries also experienced a decline in their STI ratio. Executive Directors in the Extractive Industry experienced a sharp rise in their LTI as a percentage of TGP ratio while Executive Directors in the in the Personal Services Industry experienced the opposite.

12 Prevalence of Share Schemes issued By Industry Appreciation shares Full shares Executive Directors CFOs CEOs 31% 30% 17% 25% 24% 17% 25% 47% 44% 76% 94% 90% 83% 95% 45% 27% 35% 20% 20% 91% 94% 94% 90% 44% 89% 88% 95% 95% 83% 90% The Extractive Industry has the highest prevalence of full shares across all three kinds of executives. Appreciation shares remain the dominant form of equity offered as part of long term incentive schemes.

13 Conclusion 1. CEOs and CFOs received median increases which are in excess of headline consumer price inflation. Conversely, Executive Directors received a median increase below headline consumer price inflation. 2. The Wage Gap of Small and Medium Cap companies decreased marginally while the Wage Gap of Large Cap companies increased. 3. The prevalence of full shares being issued to each kind of Executive within Large Cap companies is above 40%. 4. Given South Africa's downgrade of its credit rating to "Junk Status", LTI schemes may experience volatility as the markets react to the credit downgrade. Thank you for your interest in the 21 st Century Executive Pay Barometer. Chris Blair CEO, 21 ST CENTURY Bryden Morton EXECUTIVE DIRECTOR, 21 ST CENTURY