King IVTM is set to have a major impact on how companies look at remuneration in 2019 and beyond, says Dr Mark Bussin, Exco Member of the South African Reward Association (SARA) and Chair of 21st Century.
 
“There has been a lot of discussion about King IV’s recommendations about non-binding votes and engaging with stakeholders about remuneration, but I think that the emphasis on single-figure reporting is likely to pose the greatest challenge—and have the longest lasting effects,” he says.
 
 “Single-figure reporting is integral to King IV’s move towards a full disclosure view of remuneration, not the traditional one based exclusively on just providing director remuneration in lengthy tables.” To arrive at the single figure recommended by King IV, companies will have to undertake the difficult task of valuing the shares to which executives and directors are entitled, whereas in the past they were able simply to state what the awards were.

​This move is aimed at making it easier for analysts as well as other stakeholders to gain a consistent view of the company’s true position.However, given the fact that market values and company performance are both highly unpredictable, a fair amount of educated guesswork will be unavoidable.
 
The answer, Dr Bussin, believes, is to decide on a methodology for arriving at the desired value and then use it consistently over time.“In the end, we are looking to understand the direction in which the company is moving more than the absolute values,” he says. “It’s very important also to disclose the assumptions on which the final conclusions are based.”
 
A related trend will be to get better at performance-related pay. Dr Bussin believes that a lot of work needs to be done in this area.

In particular, companies need to be better at disentangling luck from skill. To a large degree, company performance is determined by the market: in a rising market, everybody’s revenues go up, in a falling one, they go down. He argues that performance-based remuneration should reflect out-performance of the average rather than simply rewarding better performance.
 
“To be fair, the reward should be based on how much more the company has risen than its peers in a rising market, or on how much less it declined in a falling one,” he explains.

“People get unhappy about high executive remuneration when they cannot see a link between what the executive in question did and the company’s performance. Companies will therefore need to get much better at articulating what an individual actually did to earn his or her bonus.”
 
A third key trend for 2019 will be closing the gap between what is paid to men and women for doing the same job, and also between the highest and lowest paid within an organisation.
 
To make progress in these areas, and to avoid simply mindlessly complying with legislation or codes, it will be necessary for companies to explain what lies behind their remuneration strategy, and how they propose to move towards a fairer dispensation.
 
He argues that the gap between highest and lowest wages within the company is perhaps the most worrying because it is currently widening, and the lowest paid employees are particularly vulnerable to the impact of artificial intelligence and robotics as the so-called Fourth Industrial Revolution gathers pace.
 
The only way to counter this, he believes, is to greatly increase the effectiveness of the educational system. Some commentators argue that in fact the Fourth Industrial Revolution will likely create more jobs than it destroys, but only for those with the right level of skill. 
 
“All of these trends are ultimately powered by King IV’s welcome insistence that ‘performance measures that support positive outcomes across the triple context in which the organisation operates, and/or all the capitals that the organisation uses or affects’ should be used when crafting remuneration policies,” Dr Bussin concludes.
 
“The days of easy formulas are over: we have to be able to justify why we are paying what we do by showing that we are rewarding individuals who have created value for the company and society more broadly.”
 
ENDS
​
MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, [email protected], www.atthatpoint.co.za  
 
For more information on SARA please visit:
Website: www.sara.co.za  
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association

At the 3 November 2018 Reward Awards ceremony hosted by the South African Reward Association (SARA), Standard Bank won the Reward Project award while the Nu Clicks Group won the Remuneration Report award. Martin Hopkins received the prestigious President’s Award.

The annual awards – sponsored by Remuneration Consultants and 21st Century – celebrate teams of reward professionals that design reward structures with a mix of innovation, business acumen and technical expertise in the financial and non-financial aspects of pay.

The design of an effective reward structure is crucial for organisations that want to attract, retain, motivate, and engage the employees that are best suited to helping the organisation achieve its goals. These remuneration structures have to be designed for and applied in the unique South African context and take into account the numerous economic and social challenges employees have to face.

Reward Project Award
The award for the 2018 SARA Reward Project of the year recognised the team from Nu Clicks Group that was responsible and actively involved in the development and implementation of a new reward project. The aim of the project was to make employees shareholders of the Nu Clicks Group, not only to attract and retain specialist talent like pharmacists but to ensure that all employees realised the value of their contributions.

The Nu Clicks Group was congratulated for not only achieving B-BBEE milestones but also creating wealth for employees. The project touched peoples’ lives in an unimaginable way and received coverage in various media. At the request of Cosatu, the project methodology is being shared with other organisations.

The other placed nominees of the 2018 SARA Reward Project of the year award were ACSA in second place, and St Stithians College in third.

Remuneration Report Award
The winner of the 2018 SARA Remuneration Report of the year award is Standard Bank. Anglo Gold Ashanti received 2nd place and Sasol received 3rd place for their submissions.

The Remuneration Report Award recognises organisations for how well they have demonstrated compliance with the King IVTM principles through clear and concise disclosure of the company’s remuneration philosophy and its application. The King IV Report was published on 1 November 2016 and is effective in respect of financial years commencing on or after 1 April 2017, and therefore this year’s submissions were the first evaluated against the King IV principles.

A panel of judges evaluated nominations and considered how organisations are demonstrating the broad principles of transparency, fairness and responsible pay decisions.

Specific focus was given to how organisations report on the remuneration detail, including fixed and variable pay.

President’s Award
A special President's Award that honours outstanding achievement in the field of reward was awarded to Martin Hopkins for his significant and notable contributions in shaping and uplifting the reward profession both during and prior to being a SARA Exco member.

During his career, Martin has developed and nurtured many young reward professionals. As a consultant, he has developed leading edge remuneration programmes for companies based locally and abroad.

Martin has also been the Remuneration Lead in the development of the King III and King IV remuneration governance sections.

By continuing to host the Reward Awards, SARA hopes to highlight pay practices that adhere to good governance and industry best practice. The association hopes to inspire reward professionals to always aim for transparency, fairness, and responsibility in determining how employees and executives are rewarded for their effort.

ENDS

MEDIA CONTACT: Juanita Vorster, 079 523 8374, [email protected], www.atthatpoint.co.za

For more information on SARA please visit:
Website: www.sara.co.za  
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association