Navigating the REMCO Annual Cycle

Core Steps for Effective Remuneration Governance

Executive Summary

South Africa’s corporate governance environment is in active transition. King IV’s requirements for fair, responsible and transparent executive remuneration are now intersecting with pending amendments to the Companies Act -including mandatory pay gap disclosure ratios and the prospect of binding shareholder votes with a “two-strike” rule for non-compliant remuneration policies. For remuneration committees navigating 2026, the annual REMCO cycle is no longer simply a governance calendar. It is a reputational and legal liability management framework.

In this Moneyweb article, 21st Century Group Director Dr Chris Blair provides a structured guide to the REMCO annual cycle, drawing on JSE Top 200 company disclosure data and governance reports from Shoprite Holdings, TFG Limited, Clicks Group, Mr Price Group, Woolworths Holdings, Vodacom and others. He maps the cycle across four core phases -setting the annual timeframe, gathering complete information, timing key decisions, and determining STI and LTI outcomes -with specific do’s and don’ts for REMCO members at each stage.

For South African REMCO members, HR directors, CEOs and CFOs, this article is a practical governance reference: grounded in how leading JSE-listed companies are actually running their remuneration committees in the current environment, with the regulatory and shareholder pressure landscape clearly mapped.

Key Strategic Takeaways

Reframed for REMCO Members, HR Directors, CEOs and CFOs

• The REMCO cycle is a governance risk framework, not just an administrative calendar. Pending Companies Act amendments -including mandatory pay ratio disclosure and a potential two-strike binding vote mechanism -mean that procedural failures in the annual cycle now carry direct reputational and legal consequences for REMCO members.
• Align the cycle to the fiscal year, not the AGM. REMCOs that plan backwards from the Annual General Meeting miss the upstream decisions that determine the quality of remuneration outcomes. The cycle should begin at least six months before year-end -using the third-quarter meeting to set STI targets, calibrate ESG metrics, and review LTI performance conditions before results are known.
• Information quality is a director’s responsibility, not the remuneration adviser’s. King IV requires REMCO members to distinguish between internal and external data, facts and opinions. Over-reliance on management-supplied metrics without independent external validation -particularly for benchmarking and ESG modifier calibration -is a governance failure that cannot be delegated to consultants.
• ESG metrics in incentive schemes require time and specialist input. JSE-listed companies integrating ESG modifiers into STI frameworks -including sustainability, employment equity and climate targets -consistently report that these metrics require more calibration time than financial KPIs. Build specific buffers into the REMCO calendar for ESG metric definition, not just for financial review.
• Pay gap disclosure is no longer optional -prepare the narrative now. Impending Section 30B requirements for pay ratio reporting between top and bottom earners will expose internal equity gaps that many organisations have not yet formally mapped. REMCOs that begin this analysis proactively -rather than reactively at disclosure time -will be able to manage both the data and the stakeholder narrative.
• LTI design must account for instrument type, not just vesting conditions. Different LTI instruments -performance share awards versus share appreciation rights -produce materially different outcomes under the same performance conditions. REMCOs that do not model the range of possible outcomes across instrument types risk unintended vesting outcomes that damage credibility with shareholders and proxy advisors.
• Shareholder engagement after dissenting votes is a governance obligation, not an option. King IV’s “comply or explain” approach requires proactive stakeholder engagement when votes fall below 75%. REMCOs that treat post-AGM engagement as optional are accumulating governance risk that will compound at the next annual vote.

21st Century Commentary – Insights

What 21C Observes in South African REMCO Practice -and Where the Governance Gaps Are

Dr Blair’s article maps the REMCO annual cycle against best practice from leading JSE-listed companies. What 21st Century’s RemCom advisory work across South African boards adds to this picture is a view of where the gaps between stated governance intent and actual REMCO practice are most persistent -and where regulatory pressure is most likely to force change in the near term.

1. The pay ratio disclosure gap
   The impending Section 30B amendments to the Companies Act -requiring disclosure of the ratio between the highest-paid and lowest-paid employees -will surface internal equity data that many South African boards have not yet formally reviewed. In 21C’s RemCom advisory experience, a significant proportion of listed companies have not yet conducted a structured internal pay equity analysis that would allow them to contextualise and defend their pay ratios in a public disclosure. The companies that will manage this transition well are those that commission this analysis before the requirement is mandatory, allowing the REMCO to understand the data, identify structural issues, and develop a coherent narrative for shareholders and employees alike.

   Organisations that defer this analysis until disclosure is compulsory will be responding reactively to data they have not yet interpreted, in a public forum they cannot control. 21C recommends that REMCOs place internal pay equity analysis on the agenda in the current cycle, before Section 30B takes effect.

2. ESG metrics in STI schemes: the calibration challenge
   Dr Blair’s article references the growing integration of ESG modifiers into STI frameworks across JSE-listed companies. In 21C’s experience advising RemComs on incentive design, ESG metric integration is consistently the most time-consuming and governance-intensive component of STI redesign -not because the metrics are conceptually difficult, but because they require cross-functional data sourcing (sustainability, HR, legal, risk), clear baseline establishment, and auditable measurement methodologies that can withstand shareholder and proxy advisor scrutiny.

   The most common failure mode is introducing ESG metrics into incentive schemes without adequate baseline data, resulting in targets that cannot be demonstrated as appropriately stretching or objectively measured at year-end. 21C recommends that REMCOs introduce new ESG metrics with a one-year shadow tracking period before linking them to variable pay outcomes. This gives the organisation time to establish reliable measurement, validate the data sources, and set targets that are defensible to external stakeholders.

3. The two-strike rule and binding votes: what South African REMCOs need to prepare for
   The prospect of binding shareholder votes on remuneration policy -with a two-strike rule that could trigger REMCO member re-election processes if reports fail consecutively -represents a material escalation in the personal accountability of non-executive directors serving on remuneration committees. In 21C’s RemCom advisory work, we are seeing boards begin to treat this as a director liability issue, not merely a governance compliance matter.

   The practical implication is that the quality of the Directors’ Remuneration Report (DRR) -its clarity, its consistency with actual outcomes, its responsiveness to prior shareholder concerns, and its forward-looking commitments -is now directly linked to director tenure. REMCOs that have not invested in the quality of their DRR narrative, or that have not established a structured post-AGM engagement process with dissenting shareholders, are carrying personal governance risk that extends beyond their fiduciary obligations to the company.

South African Business Implications

• The GNU economic environment eases some pay pressure but does not remove it.
  With inflation moderating and interest rate cuts providing business relief in 2026, there will be pressure from boards to restore executive pay levels that were constrained in tighter conditions. REMCOs must balance this with the reality that JSE Top 200 CEO and CFO increases already outpaced inflation in the most recent reporting period -a pattern that will attract shareholder and media scrutiny if not accompanied by clear performance linkage.
• B-BBEE transformation requirements interact directly with internal pay equity.
  Employment equity targets and BBBEE scorecard requirements create a governance imperative for REMCOs to understand the demographic composition of their pay distribution, not just the ratio between top and bottom earners. Organisations where executive remuneration is growing faster than operational and frontline pay face compounding transformation and reputational risk, particularly where those distributions are demographically skewed.
• The bargaining unit / non-bargaining unit dynamic requires active monitoring.
  As referenced in Harmony Gold’s 2025 disclosures, the differential between bargaining unit and non-bargaining unit salary increases is a standing source of internal equity tension. REMCOs that do not formally review the relationship between executive increases and bargaining unit settlements are missing a key fairness metric that organised labour -and, increasingly, institutional investors -are tracking.
• M&A activity and talent retention needs are predictable cycle disruptors.
  South Africa’s listed company environment has seen sustained M&A and restructuring activity. REMCOs that build scenario buffers into their annual calendar -including pre-approved retention frameworks and in-flight incentive adjustment protocols -manage these disruptions with significantly less governance risk than those that attempt to create retention schemes under time pressure.

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