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King IV and the Prickly Issue of Exec Salaries

The recently released King IV Report on Corporate Governance recognises that executive remuneration, both in terms of its quantum and the disparity between top and bottom wage-earners, has become a key governance issue, with real implications for long-term corporate sustainability.

“In line with King IV’s qualitative approach, it focuses on what outcomes boards and remuneration committees should be aiming to achieve,” explains Ansie Ramalho, who was King IV project lead for the Institute of Directors in Southern Africa.

Fair, responsible and transparent remuneration

Principle 14 relates to executive pay, and says: “The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term.”

The report recommends certain practices for governing bodies to consider in order to achieve the outcomes expressed in the principle. One important development is enhanced accountability through more definitive disclosure recommendations.

Remuneration should be disclosed in three parts:

  • a background statement which explains the context for remuneration considerations and decisions;
  • an overview of the remuneration policy which is forward-looking; and
  • an implementation report which is looking back at the details of remuneration awarded to each director and member of executive management.

Stakeholder input

Perhaps the biggest innovation is the provision for greater involvement of shareholders on this important topic. King IV proposes two separate, non-binding advisory votes by shareholders at each AGM, one on the remuneration policy itself, and one on the implementation report. It also specifies that in the event that either is voted against by 25% or more of the votes cast, the board should engage with dissenting shareholders to understand their concerns and objections.

“In all other jurisdictions that we had researched, the threshold below which a vote against would require a formal response from the board is higher, at 50%. This will mean that South African companies will have to become much more responsive to the concerns of their shareholders, who could also take on the role of proxies for the broader stakeholder group,” explains Ramalho.

The JSE is making the passing of the two non-binding advisory votes and the responses as stipulated in King IV mandatory through its proposed amendments to the listings rules. The draft amendments to the rules are currently out for public comment before finalisation.

In relation to the highly inflammable issue of the wage disparity within organisations, the report recommends that arrangements be provided for in the policy that ensures that the remuneration of executive management is fair and responsible in the context of overall employee remuneration. An explanation of how this matter is addressed should also be disclosed in the remuneration report.

Charting a defensible course

Furthermore, King IV suggests that boards look beyond financial indicators when identifying performance. While financial performance is obviously important, account should also be taken of the effect (both positive and negative) the organisation has on the different types of capital it uses or affects, and the triple context of the economy, society and the environment.

“Governing remuneration could be one of the board’s most important tasks in the current climate and, of course, there is no such thing as a perfect system for remuneration governance that will satisfy everybody,” Ramalho concludes. “But we hope that by focusing on what is fair, responsible and transparent in promoting the strategic objectives and positive outcomes of companies, boards will be able to chart a defensible course.”





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Africorp Solutions Presents at IPM – 2016 – King IV and Human Resources

The IPM Convention, is a 3-day convention which delivers the latest thinking and solutions in the management and development of people. Hosted at Emperors Palace, Johannesburg, all Human Resources Professionals, business leaders, suppliers and key influencers come together from private and public sectors to explore topical issues and to seek solutions to business challenges.

As part of this wonderful event, Africorp Solutions and Advisory in its second year in participating at the convention, presented on a brief update on King IV, its underpinning philosophies and distinguishing principles from King III and interesting points on recent trends which Human Resources should consider for future, delivered by Jerry Botha, Director of Africorp Solutions and Advisory.

You may contact Jerry Botha (0828896118) should you have questions around the presentation content.

We would like to thank all the delegates whom attended our presentation and hope that it was of notable value to you.

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Department for Public Service and Administration – Conditions of Appointment

The Department for Public service and Administration has issued the Conditions of Appointment (including remuneration and other conditions of service) applicable to the members of the public service commission, as determined by the President.

For access to the entire Conditions of Appointment, please click here.

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Minimum Wage Goes Up!

Those working in the domestic worker sector can look forward to increased minimum wages.

According to Timeslive, the new minimum rates come into effect from 1 December.

The Department made the announcement today.

Jobs in the domestic worker sector include cleaners, gardeners, nannies and domestic drivers.

There are two new minimum rates:

– Rates for those working in major metro municipalities and cities. This is called “Area A”. The new hourly rate for those working in Area A, and who work for more than 27 hours a week, is R12,42. This is up from R11,44 per hour.

The new weekly rate for those working in Area A is of R559,09 (up from R514,82) and the monthly rate is R2422,54 (up from R2230.70).

– “Area B” is the term for more rural areas. For those working in Area B for more than 27 hours a week, the hourly rate is R11.31‚ a weekly rate of R508.93 and a monthly rate of R2205.17.

Source: Daily Sun