Executive remuneration : considerations of South African remuneration committees

Abstract

South Africa is ranked as one of the countries in the world with a big wage gap. The debate in academic communities, the business world and for policy makers is that there appears to be no explanation for the variations in executive pay and research has been inconclusive about the factors which are used by remuneration committees to determine the pay of these executives. This research aimed to gain deeper insight into the determination of executive remuneration, including the factors that are typically considered by South African remuneration committees, with a view to providing these committees with standard criteria to assist in ensuring that the interests of all stakeholders are considered by these committees in the future. A convenience sample of 13 remuneration committee members participated in semi-structured interviews. Findings indicate that a similar process is followed and similar factors are considered by remuneration committees in South Africa. Relevant information is gathered around executive considerations, legal and ethical considerations and market considerations, and then scrutinised in line with a package that addresses fixed pay, short-term incentive pay and long-term incentive pay for the executive. Governance of the process is considered to be non-negotiable.