Shareholder activist group Just Share has highlighted the so-called vertical pay gap prevalent in SA by focusing on the extreme pay disparities between the highest and lowest paid workers at eight JSE-listed companies.
The Cape Town-based advocacy group has for several years been lobbying the boards of directors of JSE-listed companies to disclose the wages of their lowest-paid workers alongside the remuneration details of their C-suite executives that they normally publish.
Though wage gap disclosure is not yet a legal requirement in SA, Just Share says of the companies it analyses that it could find just eight that have started to disclose their internal minimum pay to allow for a vertical wage gap analysis.
The eight listed companies that have thus far complied with Just Share’s request are Absa, Investec, the JSE Ltd, Nedbank, Old Mutual, Shoprite, Standard Bank, and Woolworths. Of those, Shoprite had the greatest vertical wage gap or the biggest difference between the company’s lowest disclosed salary and the CEO’s total remuneration.
Just Share’s analysis shows that in 2022 Shoprite CEO Pieter Engelbrecht earned 1,081 times more than a worker earning the company’s internal minimum wage. That assumes Shoprite’s lowest-paid employee worked 45 hours a week for all 52 weeks of 2022, earning about R58,700.
Woolworths’ CEO earned 423 times the disclosed internal minimum pay of R85,500 per annum in 2022, followed by Standard Bank (258 times), Absa (230 times), Nedbank (176 times) and Old Mutual (123 times).
The lowest vertical pay gap was at the JSE Ltd, the company that runs the country’s largest securities exchange, where CEO Leila Fourie in 2022 earned 49 times more than the disclosed “lowest grade total guaranteed pay” of R419,585.
“We commend the companies assessed in this briefing, all of which have voluntarily made these disclosures without being legally required to do so,” Just Share said.
Nevertheless, Just Share says comparisons between listed companies is difficult as there is no prescribed method for the public disclosure of pay ratios in SA. Companies typically use a range of formats and include different elements of remuneration in their pay disclosures, which complicates analysis.
While the eight assessed companies disclose what they refer to variously as “internal minimum wage”; “minimum annual guaranteed package”; or “minimum salary”; none of them explicitly state what the lowest-grade job is that attracts that minimum salary. Just Share also said that none of the companies made any reference to contract workers to whom minimum wage disclosures do not apply.
“For Woolworths and Shoprite, the hourly base pay presumably applies to those working in these companies’ retail outlets,” Just Share said. “It is not obvious in other sectors, however, what the lowest grade job is, which means that it is unclear whether these minimum packages apply to unskilled workers.”
While the King IV report on corporate governance recommends that companies ensure that “remuneration of executive management is fair and responsible in the context of overall employee remuneration in the organisation,” Just Share says most companies assess fairness by comparing their their lowest wages to the statutory national minimum wage. The activist group also says SA companies typically resist pay gap disclosures by arguing it will be taken out of context or misinterpreted.
“While there are important differences between sectors which impact levels of pay, Just Share believes that stakeholders can make their own assessments of fairness on a case-by-case basis, and that this disclosure is a crucial first step in understanding and addressing the high labour market inequality that is so damaging to our economy and society,” it said.
Just Share also opted to focus on CEO total remuneration in its analysis rather than total guaranteed pay as the latter obscures the fact that the major portion of executive remuneration in SA is often derived from short-term and long-term incentives. Nevertheless, the group said it was encouraging to see Nedbank, Old Mutual and Investec are calculating their pay gaps using total remuneration.
“Pay gap disclosures are necessary and important as they provide crucial insights into labour market inequality, and steer informed conversations and a broader understanding of the state of pay disparities and options available to reduce inequality,” Just Share said. “This increased transparency also empowers investors to make informed decisions when exercising their voting rights on remuneration policy and implementation reports.”
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