Nhleko still top ICT earner

The telecommunication sector is still the highest paying in ICT industry, shows the 2010 Mabili Directors' Remuneration Report. This has been the case for the past four years.

According to the report, released last night in Johannesburg, MTN Group CEO Phuthuma Nhleko, who was the highest paid in the ICT space last year, is still at the top of the overall telecoms and IT remuneration list. He received guaranteed pay of R7 964 000, with a bonus of R8 000 000, taking his total salary to R15 694 000.

He was followed by Dimension Data CEO Brett Dawson, who raked in R6 021 000, the report points out. The research shows Blue Label Telecoms CEOs Brett and Mark Levy earned guaranteed pay of R5 285 000 and R5 284 000 respectively,

At number five in the ICT industry is Altron CEO Craig Venter, with guaranteed pay of R4 616 000.

While the IT industry continues to be SA's lowest paying sector from an executive point of view, non-executive director remuneration is often as - or more - favourable than other sectors.

However, this does not take into account telecommunications companies, which are not categorised as IT organisations, as telecoms falls under consumer services on the JSE.

“One of the main reasons for IT CEOs getting less is that executive pay is very closely linked to the size of the company,” says Mabili MD Laurence Grubb.

In the IT sector, companies tend to be much smaller compared to mining, finance and other sectors, he adds.

He explains there has been a noticeable increase in variable pay (the incentive component) for CEOs in the IT sector. Last year, the median total package for CEOs in the IT industry was R3.55 million and this has grown to R5.4 million, he points out. “Importantly, this has been driven primarily by significant changes in variable pay structures.”

“We believe that organisations are looking to be more responsible in terms of remuneration, and a focus on variable pay provides meaningful strategy if implemented effectively,” he notes.

There has also been pressure on companies to manage costs and this could be done by limiting increases on the guaranteed pay side, he points out. “Importantly though, if there has been a trend to manage costs on the guaranteed side, one has to ask the question: has the increase in variable pay been driven by performance?”

Grubb comments that the financial sector has seen a decline in total packages based on variable pay, due to the economic slowdown. “Does the increase in variable pay in the IT sector indicate this sector has performed well in spite of economic conditions?”

If not, he says this may signify that while there has been a shift toward variable pay, the performance management systems may not be effectively linked to the reward objectives; the link between variable pay objectives and the evaluation of performance may not be robust.

It is critical to understand the complexity that these CEOs operate under before making sweeping statements about being under/over-paid, he notes.

The best practices suggest guaranteed pay should not be exorbitant and that variable pay should make up a significant component of the total package - especially long-term incentives where the goal should be to drive a long-term approach to growth and sustainability, Grubb explains.

Importantly though, where variable pay and incentive schemes are put in place, these must link to performance, he adds.

Grubb says, tied to this is the need for improved productivity and performance. “We need to create jobs rather than reducing people to add back the shareholders' margin. This applies to all economic sectors, private and government, and from top to bottom.”