EXECUTIVE pay disclosure policies in South Africa fall far short of international standards, a new report by human resources consultancy P-E Corporate Services reveals.
South Africa has one of the largest pay differentials in the world, with CEOs being paid about 40 times the average salary of employees.
Yet more than 50 of the 80 JSE-listed companies surveyed made no disclosure at all concerning the value of share grants, even though grants were made during the year.
Only 11 companies were found to have fully disclosed the present value of current year share-based awards as shown on the schedule of remuneration of executive directors and prescribed officers.
The Companies Act requires all remuneration and benefits to be disclosed, as does the King code on governance.
A separate report by PwC finds that only 60% of the audit committees of the Top 100 companies listed on the JSE issued a positive assertion on the effectiveness of internal financial controls.
"While this percentage is likely to increase over time, companies need to ensure that the assertion made by the audit committee is supported by a formally documented annual review of the design, implementation and effectiveness of the company’s system of internal financial controls," said PwC director Nicholas Ganz.
Director of P-E Corporate Services’ financial research division Deon Thomson said consultants are concerned that disclosures are falling so far short of the standards being observed internationally. "Open a set of financial statements for a UK-or US-listed company and the remuneration report will, in a few pages, provide a clear and concise summary of both remuneration policy and contractual arrangements applying to executive directors. Contrast this with the reports of our leading companies, which often run to many pages, but contain inaccurate and inadequate information."
Mr Thomson believes companies’ shortcomings with regard to disclosure can partly be blamed on advisory institutions such as the King committee and partly on investment institutions, which should be playing a more proactive role in ensuring that companies are fully compliant.