(Un)happy returns: inside the CEO pay debate

Eight years after the initial proposal was flagged by the then department of trade and industry, sections 30A and 30B of the Companies Act have been signed by President Cyril Ramaphosa. They become effective immediately.

In terms of the new legislation, public companies and state-owned enterprises will have to disclose the highest-paid and lowest-paid employee remuneration. And the two non-binding votes on remuneration become binding, with consequences taking effect after two negative votes.

Make no mistake, this is a huge deal. As Remchannel MD Lindiwe Sebesho tells Currency, “it changes the remuneration governance paradigm fundamentally”. From voluntary best practice under the guidance of the King code, public companies and state-owned entities are now faced with statutory obligations and shareholder-binding consequences, says Sebesho.

(For more on sections 30A and 30B, Remchannel has a report available here.)

She urges company boards to be prepared to provide detailed explanations to their stakeholders for remuneration policies that might in future be much more closely scrutinised.

Meanwhile, it does seem inevitable that over the coming months, as South Africans adjust to the new regulatory regime, there will be much discussion about the precise value of CEOs.

No doubt claims will be made about the infinite value contributed by a CEO, particularly compared to workers. Efforts will be made to discourage the public from drawing any conclusion from the fact that a particular CEO’s remuneration is a few thousand times higher than the company’s lowest-paid worker. We’ll frequently be told a CEO generates several thousand times more value than the lowest-paid worker, and that the simple dynamics of supply and demand determine precisely what each party receives. Perhaps.

Certainly, there is no denying the massive contribution a good CEO makes. There is perhaps a handful of instances where an outstanding CEO can take much of the credit for building a company (Whitey Basson at Shoprite; Brian Joffe at Bidvest) or saving a company (perhaps Sean Summers at Pick n Pay). But, in large part, the best you can hope for is someone with a strategic mind and lots of energy. How much is that worth?

The performance-pay mismatch

With remarkably great timing, the latest study from the Labour Research Service (LRS) attempts to get a handle on the matter of valuing CEOs. The LRS looks at CEO remuneration from several perspectives, such as profit and turnover. It concludes it’s very difficult to come up with any sort of causal relationship between corporate performance and CEO pay.

Its research focuses on the 2025 CEO remuneration at the top 40 JSE-listed companies. The largest of these are dual listed with their primary listing in a foreign market – so the CEOs are paid in euros, dollars or pounds, the LRS explains. This invariably bumps up their value in rand terms. That shouldn’t impact the search for relative value.

At R1bn, Naspers/Prosus CEO Fabricio Bloisi rakes in the second-highest remuneration, well behind AB InBev’s Michel Doukeris, at R1.8bn.

It turns out Bloisi’s pay is steep not only by South African standards; LRS says his approximate $60m is in line with the 24^th most highly-paid CEO on the S&P 500. This means his pay is comparable to that of the CEOs of Adobe ($52m) and Salesforce ($55m), and well ahead of the CEOs of Exxon Mobil ($44m), JPMorgan Chase ($43m) and Uber ($39m).

In 2025 Naspers/Prosus reported total revenue from continuing operations of $7.2bn. In the same year Adobe reported total revenue of $23.8bn and Salesforce $37.9bn.

Overall, bigger companies do tend to pay more but, says LRS, the relationship is not proportional.

The value equation

The relationship seems to be even looser when it comes to profit before tax. For each of the top 40 CEOs, the LRS has calculated how much pre-tax profit each rand of CEO pay generates. Essentially, what value are shareholders getting for their buck. By this measurement, the shareholders of BHP, British American Tobacco (BAT), Gold Fields and FirstRand are doing best among the top 40. Significantly, BHP and BAT are the only ones among the top 10 payers on the JSE.

Here’s what it means: for every rand of the R151m that BHP paid to CEO Mike Henry, the company generated R2,168 in profit before tax, for a total of R327bn. At BAT, shareholders got R1,499 for every rand of the R155m paid to CEO Tadeu Marroco, with the company generating R232bn in pre-tax profit. At Gold Fields, every rand of the R64m paid to CEO Mike Fraser generated R1,479 of pre-tax profit, for a total of R94.6bn.

The outstanding performer on the “home front” was FirstRand’s Mary Vilakazi. She was awarded R52.7m and the group generated pre-tax profit of R57.8bn, so R1,097 of profit for each rand paid to Vilakazi.  

Time to explain

But caution is needed, as it’s difficult to draw too much from the figures. As LRS notes: “The high ratios at BAT, BHP and Gold Fields reflect their business models as much as anything else: large-scale operations with relatively lean central cost structures, not necessarily exceptional CEO performance.”

Then what to make of Northam Platinum, whose CEO Paul Dunne ranked the fourth highest-paid on the top 40, with remuneration of R223.6m? The company reported pre-tax profit of R2.5bn, which is equivalent to R11 for every R1 paid to Dunne. Shareholders aren’t getting much value there.

Impala Platinum wasn’t much better, with a ratio of just 30, Remgro was 60 and Bidcorp, whose CEO Bernard Berson was the seventh best paid in the top 40, generated just R75 for every rand paid.

All in all, it does seem as Remchannel’s Sebesho says: that company boards are really going to have to work hard to explain the oddities in their remuneration policies. It’s one thing for oddities to appear in the occasional year, but some explanation is needed when the pattern is odd.

And it’s thanks to entities like LRS that companies won’t be able to dodge their responsibility to explain. It gives some muscle to the new legislation.

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_{Top image: Rawpixel; Currency.}