This comes after the Sunday Times Rich List, released last week, stirred controversy over executive pay, largely around the huge share options given to executives, significant performance bonuses often in excess of salary, huge pay packages for non-executive directors and payments for people to leave their jobs.
"The Institute of Directors is dead against it, especially in today's climate where there is such a big gap between the haves and the have-nots," said the institute's chief executive, Ansie Ramalho.
The interpretation of "performance" should be extended beyond financial performance of the company to encompass how the company behaves as a good corporate citizen.
"We are also of the view that performance should be measured over the longer term," Ramalho said.
"It is relatively easy to manipulate results to achieve the appearance of good performance by, for example, stopping spend on research and development. This could, however, have dire consequences in the longer term as the company then stops innovating."
Ramalho said if the recession is used as an argument for giving employees fairly low increases then the argument should also apply to executives.
Patrick Craven, national spokesman for Cosatu, said the Rich List will provide unions with the leverage they need to pursue their living wage campaign, which aims to raise the levels of workers' wages.
Craven said that unions are often criticised for their "excessive" wage claims, but that the figures on the Rich List show that this is not the case.
Stephen Saad, the eighth richest on the list and CEO of Aspen, said: "I believe it is inappropriate that executives in general take a higher percentage increase for themselves than they are prepared to pay their workforce."
He recommended that the remuneration process for executives be more transparent and that internally agreed key performance indicators be publicly disclosed.
Tracking job performance requires clear definitions related to targets and objectives which can be linked back to the company's overall targets and objectives, said Martin Westcott, CEO of PE Corporate Services.
Paying executives large sums to leave is one aspect that elicits the strongest criticism.
Many companies, however, justify executive pay by saying they benchmark pay against peers, often international.
But what the CEO of a certain-sized organisation with responsibilities in SA receives will be different to what a CEO running a similar-sized operation in another country gets.
The cost of living also differs between countries.
"We should look at the purchasing power those executives have. Look at remuneration, what you would normally pay in tax and social security, at essential living costs such as housing, transport and food and see how much discretionary income is left," said Westcott.
Another area of contention is the level of pay for non-executive directors, many of whom sit on several boards, and are rewarded handsomely for attending a few meetings.
Westcott said in theory a non-executive might only spend one-tenth of the time on company business that an executive director might spend and should only receive one-10th of the equivalent salary. In practice, non-executives might be paid double this amount.
"There are two reasons. First, non-executives, particularly in listed companies, are required to take on statutory responsibilities which have an associated risk.
"In certain cases, directors can be held personally responsible for the consequences of decisions taken by the board. Secondly, market practice is that one always pays more money for a person who works on a part-time or contractual basis."
Many executives are aware that their pay packages are excessive, and give some of their money away.
On Monday, Standard Bank CEO Jaco Maree said he committed 10% of his pay to help needy black scholars.
A number of CEOs were irked by this, saying many executives donate large sums to the underprivileged but do so quietly.
Richemont CEO Johann Rupert, whose family's wealth ranks sixth in this year's Rich List, is given a salary, but donates it to charity, according to a footnote in the annual report.
The CEO of Naspers, Koos Bekker, ranked 19th on the list, does not earn a salary but is incentivised through company shares.
Author: Adele Shevel and Mamello Masote
Source: Times Live
