Shareholder activists eye JSE underperformers

JOHANNESBURG – The average chairperson of a board on the JSE earns a fee of R834 000, while more millennials are now sitting on boards, according to the PricewaterhouseCoopers’ (PwC’s) 13th edition of the non-executive directors: Practices and fees trends report issued on Tuesday.

Board fees in South Africa are increasingly under the shareholder activist microscope as they question the excessive fees paid to some boards in companies that are under-performing in a stagnant economy.

As regards remuneration, the report said the median chairperson fee across the entire JSE has risen by 5.9 percent to R834 000 from a 5 percent hike in 2018. Some organisations included the position of a deputy chairperson, who assisted the chairperson and filled in if they were unavailable.

Deputy chairpersons received a lower median increase than that of the chairpersons, at 2.3 percent (2018: 5 percent) to R704 000. The median fee for lead independent directors increased by 2.7 percent (in 2018 it was 1.7 percent) to R550 000 at the median level.

The report showed that the median increase in remuneration for non-executive directors in all sectors was above the consumer price index by a wide margin at 6.8 percent (2018: 5.3 percent) to R553 000.

Another issue being faced is the tenure of boards, which saw airline Comair in the crosshairs of shareholder activists.

After concerns were raised that the long-standing tenure of some directors could have compromised the independence of the board, Comair was forced to replace some of the old guard with independent directors.

The report showed that as at November 31, 2019, the total number of non-executive directors serving on the boards of JSE-listed companies was 2 224-178 less than in the prior reporting period.

It said the average tenure for non-executive directors had declined to four years from five in 2018 due to “board refreshment”.

The data showed a steady decline in the number of seniors (aged 75+) on boards, accompanied by a steady increase in millennials (25 to 39) throughout the 12-year period.

“This is expected, considering that all industries are being influenced by the Fourth Industrial Revolution, and this population group comprises digital natives,” the report said.

Meanwhile, gender diversity had improved among non-executives with male representation on boards declining from 80 to 70 percent.  

But racial diversity among chairpersons remained steady since the previous year, while diversity among other non-executives appeared to have improved considerably, it said.

The report also noted that South African boards were under pressure to continuously transform amid economic uncertainty and increasing stakeholder demands.

Leila Ebrahimi, an associate director in PwC’s people and organisation department, said: “Against this backdrop of uncertainty and constant change, companies are being asked to take the lead in some of society’s most complex and challenging issues.

"From seeking action on climate change to threats of disruption to the workforce, stakeholder expectations are increasing, and some boards already are responding."

The report said climate change was a complex and challenging issue for many organisations and it was visibly disrupting business.

“Companies are under pressure from investors, regulators and other stakeholders to take responsibility by taking an integrated, strategic approach to addressing climate change.

"So-called ‘long emergencies’ need to be taken heed of and companies should ensure that they are not overly focused on the short-term.”

The report found that boards needed to be equipped with the right tools to make the best possible decisions for the long-term resilience of their organisations.

“PwC, in collaboration with the World Economic Forum has developed a guide to help corporate boards drive climate governance effectively, which could be a good starting point for boards to consider their duties in this regard,” it said.

JSE-listed Sasol last year came under fire by its institutional investors, who, while welcoming Sasol’s climate change report that committed the group to reduce greenhouse gas by at least 10 percent by 2030 off its 2017 baseline, said the current disclosures should go further as “its strategic response to climate risk was material to investors, citizens, employees and affected communities”.


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