Public ‘say on pay’ activism in South Africa: Targets, challengers, themes and impact

Abstract

Background: Shareholders and other stakeholders in South Africa are increasingly raising their concerns in public about seemingly excessive executive remuneration. Most of their criticism is rooted in the large and growing wage gap in the country.

Aim: The authors investigated the nature of the entities whose executive remuneration policies and practices were publicly criticised, the types of challengers involved in this social movement, key issues raised and the impact that the challengers had on the targeted executives’ remuneration.

Setting: Public activism involving five South African state-owned enterprises and 38 companies listed on the Johannesburg Stock Exchange.

Methods: Executives and entities that were targeted in public were identified from three online financial newspapers published between 01 January 2010 and 31 December 2016. A total of 92 events were recorded involving 65 executives. Data on these executives’ emolument and three control variables were sourced from Bloomberg. Descriptive statistics and mixed-model analysis of variance tests were employed to evaluate the quantitative secondary data.

Results: In line with the extant literature, most of the targets were large, well-known companies. Individual and minority shareholders represented the largest category of challengers, followed by asset managers and trade unions. The vast majority of concerns centred on the size and composition of executives’ packages and insufficient justifications provided by remuneration committees. The total pay, bonuses and other performance-based incentives decreased significantly in the year after the companies were publicly targeted.

Conclusion: The findings suggest that public ‘say on pay’ activism can be an effective mechanism in addressing seemingly excessive executive emolument.