MUCH has been said and written about the perceived exorbitant pay of executives and the accumulation of vast wealth by capitalists. Many unionists, government officials and other commentators have argued that the huge gap between the salaries of junior employees and executives is widening the inequality gap and that this could threaten the fabric of our society.

I don’t agree with this kind of thinking, for various reasons. First, the major problem in South Africa is not inequality, but unemployment, entitlement and greed. There is a frightening quest among some of our people to accumulate material possessions and this results in them living beyond their means. This has resulted in ridiculous expectations of higher wages, accompanied by labour turmoil. Even after all Exxaro employees received shares and generous amounts of cash, they embarked on a strike complaining about living conditions and low wages. Due to greed, some people expect free services from the government and redistribution of wealth by the private sector.

But paying executives lower salaries will not mitigate greed, eradicate the culture of entitlement or improve labour relations. On the contrary, lowering the salaries of executives will affect the performance of our companies negatively, and this will lead to job losses. South African executives are much sought after in developed markets and we will lose those who are highly talented.

We should start seeing CEOs as corporate entrepreneurs, who should be rewarded fairly for value creation and the burden of responsibility. Koos Bekker and Whitey Basson have created more than 200,000 jobs directly and indirectly, so it is unfair to criticise their remuneration. Although CEOs are corporate entrepreneurs, they are making far less money than they would if they were based in their own companies. I have no doubt that if the highly experienced and qualified Sim Tshabalala and Ben Kruger were running their own exclusive asset management company, they would have made far more money than the R28m that each was paid by Standard Bank. No one complains about how much Patrice Motsepe and Warren Buffett, who are estimated to be worth about R29bn and R697bn respectively, pay themselves.

I would argue that CEOs are actually underpaid. Inasmuch as they create large numbers of jobs, huge profits and pay large sums in tax, they earn far less than people who are in sports and entertainment. Actor Tom Cruise is worth about R5.2bn. Football player Christiano Ronaldo of Real Madrid is worth about R2.2bn, while his counterpart at FC Barcelona, Lionel Messi, is worth about R2.1bn.

The sad thing is that Tony Trahar and Jacko Maree, who were responsible for the exponential growth of Anglo American and Standard Bank, are worth far less than these personalities.

Having said this, I will concede there are instances when CEO remuneration did not match their value creation.

I have always agitated for ordinary workers in agriculture, mining, manufacturing and other relevant sectors to be paid per unit produced. This principle should also be applicable to CEOs; the better the company performs, the better the CEO’s pay. South Africa’s executives should take heed of what the renowned former CEO of Apple, the late Steve Jobs, did — he was paid through share options and received a salary of $1 a year.

In his book, Gorilla in the Room, journalism professor Anton Harber wrote how Bekker, then CEO of Naspers (now chairman), took the Steve Jobs model further: "He got no salary, no bonus, no car scheme, no pension fund, no medical aid, and no golden handshake." Naspers was also at liberty to expel Bekker on the spot without giving any reason or compensation. Like Jobs, Bekker received only share options and this enabled him to intertwine his interests with the company’s success.

Bekker was fairly remunerated through the share options — had he sold them when he vacated the CEO’s position at the start of this year, he would have received more than R1bn. Would shareholders have complained? No, because in the process of amassing a lot of wealth for himself, he was creating value for them.

South Africa’s CEOs should follow the Jobs-Bekker model. This would enable them to operate like genuine corporate entrepreneurs. In addition to yielding fair compensation for them, it would go a long way towards eradicating the hullabaloo about executive pay.

• Dagada is a development economist based at the Wits Business School. He is on Twitter: @Rabelani_Dagada

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