Local bosses living high on the hog and outdoing global peers

2010-12-02 10:32

The living standards of South African chief ­executives and their net disposable incomes are by far the best in the world.

This is the finding of a survey released this week by human resources company P-E ­Corporate Services. The company analyses the latest global trends in remuneration and working conditions at more than 850 companies.

The survey calculates the purchasing power of executives’ net disposable income after essential expenses, tax and pension are taken into ­account.

In last year’s survey, South African chief executives had already fared best in terms of the power of their disposable income, but they were only slightly ahead of their peers in nations such as the US and Germany, said Martin Westcott, the managing director of P-E Corporate Services.

This year’s research, however, shows that they are now doing far better than chief executives in the US, Europe, Australia and the rest of Africa. South Africa scored 100 points on the index, with its nearest competitor, Namibia, scoring 62.

Although the survey would seem to support Economic Development Minister Ebrahim ­Patel’s growth plan proposal, in terms of which he suggested that the salary increases and ­bonuses of high-income earners be capped, Westcott warned that they were rather an indication of the poor economic growth being seen elsewhere.

Factors such as the rand’s strength against the US dollar, as well as the low inflation rate, ­resulted in South African chief executives having greater buying power. In addition, living ­expenses for chief ­executives residing in Johannesburg were the second lowest in the survey, with only Gaborone being cheaper.

American chief executives traditionally have had the highest purchasing power in the world, but that situation has weakened dramatically ­because of the economic recession in the world’s biggest economy and the weakness of the dollar.

As for Patel’s proposal of capping chief ­executives’ remuneration, Westcott said it was an unnecessary and ineffective measure.

The private sector would find ways to circumvent the restriction and to pay whatever was necessary to retain the best talent, he reckoned.

The country has a skills shortage and it would be inappropriate for government to prescribe how much executives should be paid – especially while government itself awarded exceptionally high bonuses to the executives of semi-state ­institutions.

The research showed that the differential ­between the highest- and the lowest-paid ­workers in a medium-sized company in South ­Africa had dropped slightly from a 2008 high of 58:1 to this year’s 55:1.

Increases for people in less well-paid posts had in the past eight years topped the inflation rate, while chief executives’ bonuses had declined ­because of difficult economic conditions.

The unions had now gained a foothold in this area and the situation was unlikely to change in the near future, Westcott said.

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