Hon Deputy Speaker, hon Ministers, hon Deputy Ministers and hon members, the subject introduced for debate today by the hon Koornhof is a very important one and the ANC welcomes it.
Many people will be of the opinion that executives are paid far too much; that, in fact, their salaries are quite obscene. An article in the Business Report dated 7 March 2011 entitled "Top of the Pile: The well-paid club of 15" reports that the 15 highest-paid directors of JSE-listed companies earned a total of R622 million last year. According to the 2011 edition of Who Owns Whom, these executives earn an average of more than R41 million. What do they do with it at all?
In comparison with these figures from the private sector, the top 15 earners at state-owned enterprises, SOEs, earned chicken feed - only R107 million, which works out to less than R7 million each on average.
We are not the only country in the world wrestling with this issue. Other countries are battling with it too. In the UK legislation is being proposed to amend current practices. In the US there is a Bill introducing further reforms of remuneration practices. In the EU, regulatory guidance was introduced and further reform is being considered to provide for a shareholder mandatory vote on executive remuneration.
But it is our own South African situation that concerns us here. To this end, a number of initiatives have been embarked upon to address this issue, and I want to give a brief outline of some of these.
First of all, regarding the private sector, there are three initiatives. The first is the Code for Responsible Investing in South Africa, which was introduced in July 2011 and is relevant for all institutional investors, for example, lending institutions, the Public Investment Corporation, etc.
The second is Business Leadership South Africa, which has also announced its intention to release a code on remuneration and labour practices for its members.
The third is the King III enhanced remuneration practices for the private sector and listed companies. In fact, this is now being made into law by being included in the new Companies Act.
With regard to the public sector, we have the following: the Presidential Review Commission, which was set up by the President. One of the workstreams of the commission is to look at remuneration. We await the report.
National Treasury's Review 2006-07 also looked at issues of remuneration. That was one of the things they looked at across all three spheres of government and relating to everyone in the public sector. That review is still incomplete.
In 2007, the Department of Public Enterprises brought out remuneration guidelines. They are currently reviewing the remuneration of Schedule 2 to the Public Finance Management Act entities.
So, both here and abroad it is a live issue and attempts are being made to come to grips with it.
What members also need to be aware of is that highly paid executives are highly mobile. They are on the move all over the world looking for more pay and being paid in dollars, euros or pounds.
I want to deal with what pertains to remuneration packages in our state- owned enterprises. The Department of Public Enterprises, in conducting their review of remuneration practices, was informed by comments from, among others, National Treasury, Business Unity South Africa, Solidarity and private sector experts. The PricewaterhouseCoopers survey provides insight into global modeling and how executives are remunerated. The debate is whether executives are deserving of those remunerations and incentives and, more importantly, whether the shareholders are satisfied with the performance of the executives.
In the UK, legislation on pay is being introduced. This legislation is one of its kind and comes in the wake of the global financial recession.
A report by the South African Press Association, Sapa, in April 2012 states:
Citigroup has become the first Wall Street bank to get the thumbs-down from shareholders over outsized executive pay.
At its annual meeting on Tuesday, 55% of the bank's shareholders voted against the pay packages granted to Citigroup's top executives, including CEO Vikram Pandit's $15 million ...
That equates to R118 million -
... for last year ...
The Financial Services Board has also taken the opportunity to revise its remuneration policy. So the remuneration of the executive is more aligned to current and future risks of the banking sector. The policy outlines the need for proper governance by the board to ensure that remuneration is aligned to the mandate of the organisation.
During 2010, the department placed a moratorium on remuneration increments for all SOE executive and nonexecutive directors who fall within the public sector's enterprises jurisdiction. The department has appointed a service provider to finalise the development of a new remuneration model for executive and nonexecutive directors.
State-owned enterprises have very important role to play in the developmental state and, as such, government recognises state-owned enterprises as strategic instruments of industrial policy and core players in the New Growth Path.
This recognition compels state-owned companies to align themselves with the broader government economic and strategic priorities such as skills development, job creation, and the development of local industries through the infrastructure investment programme.
Whilst state-owned companies have been under much discussion since 1994 regarding privatisation, the ANC believes that they have a critical role to play in the developmental state. The revised vision of the department reads -
... to drive investment, productivity and transformation in the department's portfolio of state-owned companies, their customers and suppliers so as to unlock growth, drive industrialisation, create jobs and develop skills.
Because of the rising levels of unemployment, not only here, but also elsewhere in the world, it is an extremely emotional issue and therefore needs to be handled responsibly and with extreme care.
Do high salaries and bonuses paid in the private sector impact on state- owned companies? Yes, they do. We as the ANC believe that much is being done to remedy the situation and we await the results of the deliberations that are in progress and look forward to a reasonable and workable solution. I thank you. [Applause.]