ANDILE KHUMALO: When too much is still not enough for executives
For the longest time I have had mixed views about the debate around executive remuneration and whether CEO salaries and bonuses are excessive.
It is common cause that business is by nature very competitive, and to be the best you have to attract and retain the best people to lead and drive it.
It is also common cause that most people work for companies in order to earn as much money as possible so that they can live their best lives. It is not an altruistic exercise. It's a commercial exchange. The employees give of their time and skill while the employer parts with cash in return.
If we accept this fact we should not be surprised that CEOs, especially those who lead very successful businesses, earn very high and sometimes eye-watering salaries and bonuses. It is a consequence of a fundamental commercial arrangement.
Two weeks ago Investec released its 2016 annual report, with full details of the earnings of its top four executives. In total these four gentlemen were paid a cool £19-million (R325-million) in salaries, bonuses and other benefits in one year. Yes, just one year.
Investec CEO Stephen Koseff and his MD, Bernard Kantor, each earned a total of £4.8-million, while the group's risk and finance director, Glynn Burger, took home £4.3-million. All these packages included a salary portion, a bonus and a long-term incentive award.
The group's head of the asset management unit, Hendrik du Toit, was the biggest earner, with a £4.6-million bonus and £440,950 in salary.
Investec's asset management business now manages £95.3-billion worth of assets, having grown this by almost 26% in 2016 - that is an additional £19.6-billion in one year.
And as Du Toit and his team were growing the base they delivered a 22% increase in operating profit and delivered £164.8-million onto the group's bottom line.
Presented with the facts above, any rational commercial person would argue in favour of paying Du Toit a sizeable bonus for his clearly fruitful work.
But, like most things, the debate is not that simple.
The issue is not whether executives should be remunerated when they perform. The debate on executive remuneration is often the amount. How much is too much? And what is the right measure or yardstick to apply?
King IV says boards of directors should approve a policy that "articulates and gives effect to its direction on fair, responsible and transparent remuneration".
Many analysts believe that fairness in executive remuneration is achieved when CEOs are paid in relation to their peers in similar sectors and geographies. In short, if we all are in the same business and operate in similar geographies, then it is OK for us to pay whatever we want as long as our peers do it too.
This is the reason that banking and financial services, for example, typically get the harshest criticism when it comes to executive remuneration.
What fuels this logic further is the reality that if you don't adequately remunerate your top employee, someone else will.
The other side of the fairness argument is societal.
According to PwC, the Institute of Directors in Southern Africa Remuneration Committee Forum's recent paper on fair and responsible remuneration discusses the burning question of "how much is enough?" when considering executive pay, concluding that the answer to this question lies between the extremes of "not less than the market" and "not more than the organisation can afford".
This worries me as many companies could easily argue they can afford paying their executives and the market is simple to assess - just look at the annual reports of their competitors.
But the challenge with the societal argument is that it ignores the truth.
The truth is that most employees don't think much about society when negotiating their packages with prospective employers. They think about their pocket.
Why should executives be any different?
• Khumalo is chief operating officer of MSG Afrika and presents Power Business on Power98.7 at 6pm, Monday to Thursday