The DTIC aims to narrow the pay gap between executives and workers
Planned amendments to the Companies Act will place executive pay in the spotlight.
Trade, Industry and Competition Minister Ebrahim Patel has announced that new legislation will require the disclosure of executive earnings to “tackle the gross injustice of excessive pay”.
Patel made the announcement during his department’s budget vote speech in Parliament this week, noting that the aim was to narrow the earnings gap between the highest and lowest paid employees in a company. The bill, which will contain amendments to the Companies Act, is expected to be finalised by July 2021.
“A new bill that will be finalised within 60 days will require disclosure of wage differentials in companies, stronger governance on excessive director pay and enhanced transparency on ownership and financial records,” he said.
“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,” he added.
The Companies Act 2008, requires certain companies to include the disclosure of directors and prescribed officers’ remuneration in the financial statements, although according to Deloitte, several companies have struggled with the interpretation of the relevant section.
On 21 July 2020, the Companies and Intellectual Property Commission (CIPC) announced that it was mandatory for annual financial statements to include a disclosure of the remuneration of directors and prescribed officers, as well as other benefits.
The Companies Act is expected to undergo further amendments in the second half of 2021, according to Patel. This will include ways for improved worker representation in decision-making in companies and on boards of directors to bring about inclusive growth.
“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.
“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,” he added.