Are our CEOs really so overpaid?
South Africa has some of the best-run companies in the world. The real return on capital of South African listed businesses is currently 10% – the highest in the world.
In some notable areas, such as corporate transparency, board effectiveness and financial sophistication, South Africa ranks first in the world. South African companies are clearly vibrant and competitive on the global stage, and many of the CEOs who run these companies deserve high praise.
But trade unions have begun to cite high levels of CEO pay in tactical negotiations to improve their members’ pay. Politicians have called for CEO remuneration to be capped.
To settle the dust in the debate, we analysed the profitability and executive remuneration of 230 JSE-listed companies. We used the excess return (over and above the market return) on shareholders’ funds as our measure of corporate profitability, and we used total remuneration as our measure of CEO pay to see who is being overpaid or underpaid according to shareholder returns.
» Aling is director of quantitative research at Prophet Analytics