Parliament should pass a legislation to regulate executive remuneration after the Brian Molefe saga
24 May 2017
The Congress of South African Trade Unions has noted the decision by the Parliament’s Public Enterprises Committee to institute an urgent enquiry into the reappointment of Brian Molefe as CEO of Eskom. We welcome this probe and hope that it will be wide-ranging, transparent and swift; so as to spare the country any more humiliation and also to avert any potential instability of a strategic state institution like Eskom.
The Brian Molefe saga cannot be resolved without government looking at the culture of exorbitant remuneration for company executives both in the public and private sectors.COSATU does not accept this argument of the so-called law of supply and demand or the invincible hand that is used to justify or explain away executive remuneration. It has been argued that since there is dearth of skills and high demand for managers these managers should be paid way more than ordinary workers.
This is unacceptable because even if their remuneration were to be linked to performance the productivity is due to workers on the floor and not only on the CEO. Therefore, there is no explanation on why salaries of executives are high compared to ordinary workers on the shop floor.
We commend the African National Congress for providing leadership this time around and learning from the SASSA and SABC failures .The ANC needs to respect the mandate of the electorate by ensuring that no government department, political principal or state institution is allowed to act inappropriately without consequences. The centre should be seen to be holding at all times for ANC to be able to stop the judicial takeover of the country.
COSATU challenges parliament to decisively deal with this matter by exploring the possibility of passing a legislation to regulate executive remuneration of both public and private companies. SA has high wage inequality and prevalence of low pay. According to the national minimum wage report over 6.7 million workers earn below 3500 and over half of the workforce earns below 3500 and 4.6 million do not even earn R2400 per month.
As a country ,we cannot rely on shareholders to enforce good ethics as they do not have adequate information and they are usually not interested in what is paid to the CEO as long as they can receive their dividends. The private sector is not committed to root out corruption. They have refused to appoint social and ethics committee as required by company laws to evaluate their compliance with labour and corruption laws ;and they have made an application to companies tribunal to be exempted from the requirement to act ethically.
The recent tax increase of the highest marginal tax rate to 45% is a step in the right direction but is not enough. There should be wage ceilings for executives and we argue that this would not result in these CEO’s leaving as executive pay is not performance linked.
According to the 2014 Labour Research Service report on 89 listed companies’ executive remuneration, average minimum wage for workers in 2013 was calculated at R3738 or R44856 per year whilst the average for executive directors was R5.5 million rand and for CEO’s 6.8 million. The average salary increase in 2013/14 was 8% for ordinary workers, 14.0% for executives and 16% for CEO’s. Interestingly the CEO’s were paid these salaries and received these average salary increases despite a fall in profits.
Issued by Sizwe Pamla, National Spokesperson, COSATU, 24 May 2017
