Executive Pay trends –
more of the same

Executive pay is a topic which regularly finds its way into the media – and often for the wrong reasons. This is not unique to South Africa. Around the globe, this is a pertinent topic, given the levels of income inequality that exist globally.

It has been stated that the richest 8 individuals collectively are richer than the poorest 50% of the world population.

This a shocking statistic that brings to the fore how large the gap between the rich and the poor is. This economic landscape is why the financial gap between those at the top of an organisation and those at the lower levels has become an increasingly contentious point.

The 14th edition of the 21st Century Executive Pay Barometer analyses executive pay within JSE listed companies. This report has found that although there have been marginal changes in executive pay trends, the overall picture remains a familiar one. The executive increases received by CEOs, CFOs and Executive Directors are comparable with the median increase received by general staff (approximately 6% according to the 21st Century Increase Report).


Table 1: Median Executive Increases

wage gap

Table 1 indicates that executive guaranteed pay increases would not have had a significant effect on the wage gap as they have been in line with those received by general staff. The current inflation forecasts from the various banks indicate that CPI in South Africa is expected to increase between 4.3% and 4.5% in 2019. This means that executive increase (as well as general staff increases) outstrip general inflation but as we know executives are less affected by inflation because of their spending patterns. This is the topic of another paper. The wage gap remains positively correlated with the size of the company. Table 2 illustrates this positive correlation.


Table 2: Wage Gap by Company Size based of Guaranteed Pay

The positive correlation between the size of the company and the wage gap is a result of larger companies having their CEO at a higher grade (which attracts a larger salary) than smaller companies.


The wage gap illustrated in Table 2 only looks at total guaranteed pay. The elements of an executive’s pay that are usually publicly scrutinised are the less visible, variable pay elements (short term and long term incentives). Both short term incentives and long term incentives are viewed as significant contributors to the wage gap when total earnings (including variable pay) is analysed – it can increase the wage gap by 2-3 times.


Short term incentives as a percentage of total guaranteed package have a positive correlation with an employee’s job grade. In other words, as the grade of an employee increases, we typically find that the short term incentive target percentage (as a percentage of total guaranteed package) increases as well.


Similarly, this pattern persists when analysing long term incentives. A notable difference when looking at the trends within long term incentives is the eligibility. Short term incentives are often offered to general staff, whereas long term incentives are usually reserved for executives and critical-skilled employees. The tables below indicate the median percentage of total guaranteed package that each kind of executive received.

Table 3: Median Annual Variable Pay Percentage

The table above indicates how significant variable pay is in an executive’s pay mix.

In the past, executive variable pay has been scrutinised as a result of the pay and performance link. This link has not always been as transparent as the public would like, and has resulted in increasing cases where this link has been questioned. The introduction of the King IV governance guidelines has increased the transparency of this link.

King IV has also introduced two non-binding votes to shareholders on the topic of executive pay. One vote is based on the remuneration policy, the other vote is based on the implementation of the policy. 2019 has seen an increase in the number of “no” votes received by companies in both these votes. This increased activism has caused a number of organisations to review their remuneration policy and make decisions on whether it should be adjusted or not after stakeholder engagement.


The trends within executive pay have not changed significantly and have remained an issue which finds its way into the media regularly.

The saying that “the tallest trees catch the most wind” rings true in this case, as it is those that earn the most that are routinely scrutinised.

It will be interesting to see whether the increased activism around executive pay votes will lead to any material changes in executive pay trends.

It will be interesting to see whether the increased activism around executive pay votes will lead to any material changes in executive pay trends.


Currently, as it stands, the executive pay trends that have been observed in the past have persisted in 2019.

Written by:

Bryden Morton
Data Manager
B.Com (Hons) Economics
[email protected]



Chris Blair
B.Sc Chem. Eng., MBA – Leadership & Sustainability
[email protected]



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