I had the privilege to sit on a panel with the esteemed Retired Judge Mervyn King in South Africa. Our audience was an all-female one comprising of heads of industry, lawyers and many chartered accountants. As a wannabe corporate governance expert and due to my panel colleague being THE guru in this field, I conducted extensive research into the proposed amendments to the Companies Act and in fact surprised myself by not only thoroughly enjoying what I discovered, but also realising that similar to our journey as women in the business sector, from a corporate governance perspective there is still a lot of work to be done to equal the playing fields.
I drew this conclusion from the proposed amendments to the Companies Act relating to remuneration disclosures in the form of pay gap reporting requirements that, if introduced into the Companies Act, will result in greater transparency of a company’s activities and provide for more governance around the remuneration of executives. It will also do away with articles such as one I read which stated that in 2023 the average nominal take home pay was R14,5K per annum, whilst the average salaries of executives of banks was R132m per annum. Some commentaries noted that South Africa has the largest income inequality in the world. Even Judge Zondo recommended in his report that the pay gap between the highest and lowest paid employees has to be narrowed.
The reason for the proposed amendments to the Companies Act is in fact very interesting. As a result of a review conducted in 2019 by the Financial Action Task Force (FATF) (of which South Africa is a member), into South Africa’s anti-money laundering and terrorist financing prevention system, it was determined that our anti-money laundering legislative framework contained significant shortcomings. In response to the aforesaid, South Africa determined to strengthen its beneficial ownership provisions which resulted in the promulgation in 2022 of the General Laws Amendment Act. Four pieces of legislation were amended, the sole purpose being to improve the disclosure and availability of beneficial information. As a result of the amendments to the Anti-Money Laundering and Combatting Terrorist Funding Amendment Act to compel disclosure of the real or true, direct or indirect owner or effective controller of 5% or more of the securities in almost all public and private companies, it has been proposed that various sections of the Companies Act be amended to align with the aforesaid. Such proposed amendments include the introduction of obligations on public and large private companies to establish and maintain a register of disclosure of Beneficial Interests as well as a register of persons who hold Beneficial Interests in a company. It is however the disclosure of the wage gap that has proven to be the most controversial proposed amendment to date primarily because the views of business and labour are so diametrically opposed.
At present, the Companies Act states that each company required to have its annual financial statements audited must include particulars showing inter alia, remuneration as defined and benefits received by each director and public officer. Notably no provision is made regarding the lowly employee who simply remains a forgotten product. Enter the proposed Amendment Bill which not only proposes the 2 Strike Procedure (more about that in another article) but will legislate the preparation of a company’s remuneration report which will be required to include a copy of the company’s remuneration policy and implementation report for the financial year in question containing details of the total remuneration received by each director and public officer, the total remuneration received by the highest paid employee, the total remuneration received by the lowest paid employee and the average total remuneration of all employees, median remuneration of all employees and the remuneration gap reflecting the ratio between the total remuneration of the top 5% highest paid employees to the remuneration of the bottom 5% lowest paid employees.
The day that the disclosure requirements introduce a category regarding the distinction between salaries of the highest and lowest paid men and women in an organisation will be a day worth celebrating.
So who is listening? Who is constructively taking steps to address unsustainable pay discrepancies, and that’s not even talking about women or South Africa’s brain drain at this stage. What steps are companies taking to even the playing fields? And yes, I’ve heard the arguments; executives take more risk and therefore deserve to be paid more. That may be the case but how does such a statement impact the lives of the lowest paid employees who take just as much pride in the role they play and the contribution they make to the company. Where are the incentives for those employees?
The proposed amendments to South Africa’s Companies Act represent a significant step toward fostering transparency and accountability in corporate governance. By addressing remuneration disparities and implementing rigorous disclosure requirements, the legislation aims to challenge entrenched inequalities and promote sustainable business practices. While these measures align with global standards, they also underscore the urgent need for companies to rethink their approach to fair pay and inclusivity.
The journey to achieving pay parity in corporate South Africa mirrors the broader societal push for justice and fairness. It is not merely a compliance exercise but an opportunity for businesses to redefine their role in building a balanced and equitable economy. As Judge Zondo and other leaders have emphasised, narrowing the wage gap is more than a moral imperative—it is a practical necessity for sustainable growth. Let’s hope that these legislative changes ignite meaningful action, ensuring that all contributors to a company’s success are valued and fairly rewarded.
Wynne Kossuth
Wynne is a specialist consultant and attorney with twenty eight years’ experience, practicing with Osiris Law, a Global Legal Advisory Service in Mauritius.