A requirement that companies disclose wage differentials between executives and workers was among the eye-catching measures unveiled by trade, industry & competition minister Ebrahim Patel on Tuesday.
In his budget vote speech in the National Assembly, Patel said a new bill containing amendments to the Companies Act will be finalised within the next two months "to tackle the gross injustice of excessive pay". The legislation will also require disclosure of what executives earn.
SA is consistently rated among the most unequal societies in the world, while business is likely to argue that state interference will dent the country’s potential as a destination for investment and skilled workers in demand across the world.
A recent PwC report showed that CEOs from the 10 biggest companies listed on the JSE earned about R24m a year on average, more or less equal to their peers at London-listed companies and about six times more than what President Cyril Ramaphosa earns.
SA’s minimum wage is just more than R20 an hour.
The amendments will also deal with stronger governance of excessive director pay, and enhanced transparency of ownership and financial records. The move comes as Patel drives efforts to promote employee share ownership schemes and worker representation on company boards of directors.
“For a number of years now, shareholders and policymakers globally have put the spotlight on executive pay. These concerns relate to the connection between pay and long-run performance and the pay gap in a firm. A good example was the executive bonuses and severance packages at firms that are not doing well. We are looking carefully at global trends on pay disclosure and reviewing legislation on this matter,” said Patel
A further amendment to the Companies Act is to be prepared within the next three months, Patel said, which will set out ways for improved worker representation in decision-making in companies and on boards of directors. He cited the example of Coca-Cola, which has decided to appoint two worker representatives to its board, and PepsiCo which expects to have a worker representative on its board by September.
Inclusive growth "is about sharing wealth and opportunity, breaking free from the shackles of the past, of a society divided between bosses on the one hand, and workers and servants on the other. If we really are all in this together, then our patterns of ownership, power and control must be transformed," Patel said.
"We now need to step up policies that actively promote worker ownership of shares in firms and representation of workers on corporate boards, as well as support for broad-based ownership vehicles in the economy."
Patel said what was new in this approach was that worker ownership arrangements should not be in the form of passive dividend-flow arrangements but must ensure that the voice of labour is heard in the top decision-making structures in the corporate sector.
"In this way a greater democratisation of the economy can be realised and the stakeholder model of company law introduced by the 2008 Companies Act can be extended by giving a real voice to workers," the minister said.
In an interview with Business Day after his speech Patel said: "We have got to deal with inequality; this is not sustainable. We need money to be invested into workers and production lines for businesses to grow market share."
He said research has revealed that more than 230,000 workers currently own shares in about 50 companies. A register of worker ownership will be maintained and published annually.
The government will work with unions and corporates to improve funding arrangements to ensure that the stakeholder model "provides for real ownership and a greater say in decision-making. We also intend to work with tertiary educational institutions to assist in the further education of worker directors and potential directors," Patel said.
The Competition Commission, which investigates antitrust practices such as price-fixing and abuse of market dominance, will on Wednesday launch a market inquiry into online platforms. These include e-commerce market places, food delivery, short-term accommodation and travel e-platforms.
Later this year the commission will release a report on the state of economic concentration in the industry, Patel said.
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