“It’s more about the complexity so there’s a general consensus that the model will change. At the moment an executive’s pay, for example, is around two thirds variable pay and only a third fixed pay,” Seegers, the director of human resources services at PwC, told CNBC Africa on Wednesday.
PricewaterhouseCoopers (PwC) released the fifth edition of their 2013 Executive Directors’ Remuneration – Practices and Trends Report on Wednesday, which is aimed at giving some clarity on the issue of the “pay gap”.
It then goes on to discuss the merits of a new remuneration model based on work done by PwC in the United Kingdom.
According to the report, there is a general consensus that the current model of executive pay cannot continue and that executive remuneration is increasingly coming under scrutiny from shareholders, investors and other stakeholders.
“Executives are also expressing their view that the volatility around future variable pay is concerning for them. Many of these guys are running organisations knowing that they’re making huge success out of these businesses but when you’re getting attacked from institutional investors, shareholders around pay, it does distract a little from running those businesses,” said Seegers.
“Fortunately it’s not all about the money, the single biggest item on a CEO’s agenda is talent and retaining that talent,” he added.
While it can be argued that executives should be paid more based on performance, the pay gap between chief executives and other staff members is gaining attention. Seegers indicated that there was a slight increase in overall chief executive recompense over the last year.
“We took the entire Johannesburg Stock Exchange (JSE), as we’ve done in the past, and one or two in the trends and the overall increase there is about four per cent so in rand terms that’s just under three million per executive. And that rises if you look at the different roles from a CEO or CFO,” he said.
A proposed alternative has been for chief executives to forgo a pay increase and redistribute that capital but a number of those JSE companies chose not to disclose their salary figures. This indicates that the demand for increased disclosure hasn’t changed behaviour.
“We’re saying we would like to see better disclosure around what companies actually do as single corporates not only about their pay and the differential between the highest and the lowest pay but what else they do, in terms of providing transport, providing education,” said Seegers.