These are the trends that shaped executive remuneration in 2020

The year 2020 tested companies and their boards, demanding rapid responses to new challenges. As the pandemic rocked the global economy, companies were faced with tough decisions on executive remuneration. Shareholders voiced their concerns about the value created by boards and the fairness of executive pay. Andréas Horak, People & Organisation Reward Co-lead at PwC, highlighted key trends in executive pay in 2020 in an interview with CNBC Africa. The report by PwC delved into two main sections focusing on burning agenda topics and changing opportunities for Remuneration Committees (RIMCOs). The first section emphasized the integration of ESG (Environmental, Social, and Governance) factors in executive scorecards to evaluate performance for variable pay incentives. However, only 27% of companies analyzed in the JSC (Johannesburg Stock Exchange) incorporate ESG in executive pay measurements. Discussions also revolved around the evolving role of RIMCOs to possibly become people and culture committees, addressing broader cultural influences on business. Moreover, the availability of data for RIMCOs to make informed decisions was crucial in the rapidly changing economic landscape. Real-time executive dashboards were highlighted as tools for better alignment with shareholders and stakeholders to drive engagement and alignment. The interview also discussed the delicate balance between justifying executive pay during challenging times and the moral responsibility to consider wider impacts. Horak pointed out two distinct population samples where some companies thrived amid the pandemic, benefiting from increased demand for services. Tech companies and specific food retailers saw significant performance, mirroring a sense of fairness where executive pay was tied to sustainable gains rather than at the expense of job losses. Several industries, including mining and financial institutions, navigated ways to preserve cash and jobs amidst the crisis. Some companies responded to the call for solidarity by implementing temporary pay cuts over three to six months, while others opted for permanent reductions at the executive level to safeguard employment. The conversation also delved into diversity and inclusion on boards, particularly focusing on gender parity and demographic representation. Non-executive director fees were examined based on roles rather than race or gender, promoting fairness in remuneration. However, the report highlighted the need for qualitative assessments of board functioning and diversity. The data revealed that while there has been progress in diversifying boards, with approximately 48% of board members being white Africans and 40% being black Africans, there is still room for improvement. Representation of Indian, Asian, and colored individuals remains lower but shows signs of advancement. Board chairperson positions still predominantly comprise white Africans, signaling a need for continued efforts in achieving greater representation. Despite some strides in promoting diversity, the data suggests that board composition in South Africa is not yet fully reflective of the wider population. The report underscores the importance of ongoing efforts to enhance diversity and inclusivity on boards to drive sustainable business growth and governance.