South African asset managers question executive pay benchmarking

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South African executive pay debate

Highlights

PwC's 19th Directors' Remuneration and Trends Report shows median short-term incentives for CEOs and CFOs rise by 42% and 39%, with long-term incentives up 67% and 54%.
Critics argue benchmarking pushes executive pay higher regardless of outcomes, citing examples such as Truworths CEO remuneration rising 11.5% annually while share price falls 2.8%.
Pick n Pay board waives proposed 4% non-executive director fee increase after shareholder opposition at the August AGM, underscoring investor influence on remuneration decisions.

PwC data and investor criticism

As reported by Moneyweb, PwC's 19th Directors' Remuneration and Trends Report finds that median short-term incentives rise by 42% for CEOs and 39% for CFOs, while median long-term incentive outcomes increase by 67% and 54% respectively.

By contrast, fixed remuneration increases more modestly, rising by 6% to R8.8 million for CEOs and by 1% to R5.5 million for CFOs. PwC says the shift toward performance-linked pay is positive, with boards focused on keeping rewards tied to performance and sustainable value creation.

Aeon Investment Management ESG analyst Bilqees Stoffberg says those faster-rising incentives only make sense when they reward genuine performance. She argues that benchmarking can weaken that link because boards often target or exceed peer median pay, pushing remuneration higher year after year regardless of outcomes.

Stoffberg says best practice is to link bonuses to clear performance targets, but adds that some companies still grant discretionary bonuses or shares that vest after a set service period. RECM founder and director Piet Viljoen also disputes the assumption that long and short-term bonuses are necessarily performance-based, calling executive pay a "disgrace" in most cases and saying benchmarking is being "gamed in a big way."

Pressure on boards and shareholder influence

Viljoen points to Truworths CEO Michael Mark's remuneration between 2014 and 2025, which he says grows at an average annualised rate of 11.5% while the share price declines by an average of 2.8% a year. He also cites the case of former Woolworths Holdings CEO Roy Bagattini, who retains long-term incentives under restricted share and performance share schemes despite retiring on 31 May 2026; the awards carry a combined fair value of R88.5 million at 28 June 2026, the end of the group's financial year.

PwC Reward Partners says benchmarking is meant to provide market evidence rather than justify automatic pay increases. The firm says upward pressure can result when companies treat the median as a target instead of a reference point, and adds that pay decisions should also reflect company performance, individual performance, affordability and the specific context of the role.

That debate is increasingly relevant for South African listed companies as investors scrutinise whether remuneration policies align with shareholder returns and workforce conditions. Stoffberg says shareholder engagement can influence outcomes, pointing to Pick n Pay's August AGM, where Aeon supported the board's salary freeze for senior executives but opposed incentive eligibility and a proposed 4% increase in non-executive directors' fees while store-level employees are asked to accept reduced benefits.

After the AGM, the board issues a JSE Sens announcement confirming it will waive the 4% non-executive director fee increase. Aeon says the decision shows constructive shareholder engagement can affect board decision-making on executive and director pay.

In our earlier article, we examined PwC’s findings on executive pay at JSE Top 200 companies, showing that short- and long-term incentive payouts for CEOs and CFOs rose far faster than fixed remuneration. We also noted that tighter governance rules are increasing scrutiny, including mandatory pay-ratio disclosures and binding shareholder votes that can restrict non-executive directors’ roles on remuneration committees if pay reports are repeatedly rejected.

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