Should the government cap CEOs’ pay? Should shareholders be more active? Should key assets be nationalised?

These are some of the questions being asked after a report by Deloitte showed top executives at JSE Top 100 companies earn R69 000 a day (R17.9-million a year) on average.

Gwen Ngwenya‚ chief operating officer of the Institute for Race Relations‚ said the solution lay primarily in shareholder activism.

Where CEOs of private companies were also the owners‚ “it makes sense that the entrepreneurial reward should lie predominantly with them” since they were the ones who had “taken the risk”.

ALSO READ: Meet SA's R69‚000-a-day workers who STILL get inflation-beating increases

However‚ “where the CEO is not the owner and has been put in place by a board accountable to its shareholders‚ the board should scrutinise the value contribution of their workforce‚ which includes the executive‚ and assign the rewards as reasonably as possible”.

Ngwenya said this would still result in CEOs earning more than junior workers‚ but it “might reduce the gap”.

She advised concerned parties to “apply pressure to shareholders to invest in companies that are committed to more equitable wage structures”‚ adding: “I prefer this approach; a solution that comes from shareholders as opposed to a government mandate. And this approach has been relatively successful for the environmental lobby — it can work for other causes society cares about.”

According to Patrick Craven‚ of the South African Federation of Trade Unions‚ the “obscene” earnings of CEOs made it clear nationalisation was needed‚ especially as transformation had been “hijacked” by those with another agenda.

“Unfortunately‚ the ideas of ‘radical economic transformation’ and ‘defeating white monopoly capital’ have recently been misappropriated by members of a corrupt faction who have turned it into empty rhetoric for their own ends‚” he said.

“By hijacking this legitimate programme‚ they discredit what is still the only way out of the country’s crisis of poverty‚ unemployment and particularly the inequality so graphically exposed in this report.”

Craven said radical transformation should be “made the centrepiece of a mass campaign by workers and the poor for democratic nationalisation of the mines‚ banks and key industrial monopolies”.

Leslie Yuill‚ Deloitte’s actuarial‚ reward and analytics leaders‚ said the implementation of the King IV report on corporate governance would promote more dialogue between companies and their shareholders.

The report was formulated by the Institute of Directors of Southern Africa and emphasises ethical leadership‚ transparency and principles rather than the formulation of official rules in corporate governance. It also focuses heavily on remuneration guidelines and the responsibilities of stakeholders.

Yuill said that in line with this‚ increased dialogue would “have a positive impact overall‚ both on the structure of remuneration policies and quality of disclosure in implementation policies”.

He added: “Remuneration committees will have to continue to focus both on the target-setting process to ensure targets are appropriately stretching and on the disclosure of these targets in relation to the pay-outs”.

He said the challenge for the future would be “the derivation of simpler‚ more shareholder-aligned and yet more societally oriented structures” and that perhaps the establishment of minimum shareholding would be a goal.

Gwenya added a word of caution on what to expect if the gap was reduced. “I don’t believe it would change much economically. If you cut the average executive wage by half‚ to approximately R35 000 a day‚ in a company with 1‚000 employees‚ it would mean a salary increase of around R700 per month”.

This‚ she said‚ would “obviously ease financial burdens somewhat‚ but it’s insignificant to the upliftment that can be generated through attracting investment and educating South Africa’s youth so that they can participate in a knowledge-driven and competitive global economy”.