The Mabili 2008 Directors' Remuneration Report has identified a number of trends consistent with previous years as well as a number of trends that break away from previous observations.
One of the highlights has been the continuing low level of pay in the information technology sector. The report notes that for the fourth straight year, IT companies have received the lowest packages out of all the vertical markets.
The report notes that CEOs in the technology sector received a median guaranteed package of R2 million and median total package (including short-term incentives) of R3.4 million. This is lower than the median guaranteed package of R2.6 million and the median total package of R4.7 million for the entire CEO sample.
Laurence Grubb, Managing Director of Mabili Reward, notes that a number of key considerations should be taken into account when interpreting these figures. According to Grubb: "The listing structure of the JSE isn't entirely representative as a number of companies with significant technology portfolios are not listed in the technology sector. Most obvious are the telecommunications companies which are grouped in the consumer services vertical market."
Grubb goes on to note that there are a number of other organisations grouped elsewhere in the JSE listing structure that have strong technology portfolios and may considered to be technology-oriented companies. A prime example would be Naspers, which appears in the media industry sector. Moreover an organisation like Vox Telecom hasn't made the move over to the main JSE board despite being a significant player in the local technology sector.
Grubb notes that a second consideration that should be taken into account is the size of the organisations in question. Grubb notes: "The report clearly indicates that the size and complexity of an organisation is an influential factor in determining the appropriate level of pay for directors."
Mabili's report uses market capitalisation as a measurement of organisational size and complexity, and identifies six distinct size groups. Category 'A' organisations sit at the bottom end of the scale and the group is made up of organisations with a market capitalisation of less than R1 billion.
Grubb notes that the median market capitalisation for companies sitting in the IT section is R862 million, in line with the smallest organisations in the report. "As such, IT directors appear to be relatively well paid when the size dimension is brought into play. The median guaranteed package for Category 'A' CEOs is R1.6 million, while the median total package is R2.8 million. Given these figures one would say that IT CEOs receive above average packages based on the size of the organisations they lead."
Overall, the gap between the highest paid workers and the lowest paid workers continues to be an important issue and this differential looks likely to continue growing. Mabili believes that while this disparity is a key issue, the level of unemployment is possibly a more pressing issue.
As Grubb notes: "There appears to be a greater understanding that executive pay is about retaining top executives in short supply, in order to create jobs opportunities and drive the economy towards broad-based prosperity. Where this is achieved, the level of unemployment will drop, and this would seem a far more constructive approach than trying to manage the differential between the highest paid and lowest paid workers."
For further information, please contact Laurence Grubb at telephone +27 11 292 6940; fax +27 11 884 0897; e-mail laurence@mabili.co.za.
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