IT bosses earn less than counterparts

By Nicola Mawson for Mabili
Johannesburg, 08 Nov 2006

SA's lowest paid executives are in the IT sector, while telecoms CEOs score in the salary stakes, says human capital and technology solutions company Mabili.

Mabili's 2006 Directors' Remuneration Report found that the average CEO earned R5.35 million last year, a 24% increase on the previous year. These figures exclude share options.

However, the company found CEOs in the IT sector are not raking it in as much as their counterparts. It says the average CEO package in the IT sector amounts to R3.5 million. Two CEOs and one executive chairman received packages of more than R5 million.

Mabili lists Telkom and MTN in the consumer services sector and notes that the average package for a CEO in this sector is R6.3 million. It adds that both Phuthuma Nhleko, CEO of MTN, and Sizwe Nxasana, then CEO of Telkom, received packages of over R14 million.

The IT sector, states Mabili's report, is "still in its infancy and remains a volatile business environment", in addition to being the smallest sector covered in the report.

The report points to the fact that only three of the 13 companies surveyed posted an after-tax profit of more than R100 million, leading it to conclude that "executives in this sector are feeling most pressure financially".

Top earners

The highest paid CEO in the IT sector is Jens Montanana, who heads up Datatec and received a dollar-based package that converted to R10 million. Dimension Data executives Brett Dawson and Jeremy Ord also received dollar-based packages, which converted into R8.5 million and R7.6 million respectively.

Peter Watt of Business Connexion received the highest package in local currency, R4.8 million, while David Kan, of Mustek, received the smallest package of R961 000.

CFOs in the sector - on average - received R2.4 million and the average package for the role of executive director in the IT sector amounted to R1.7 million.

"These figures are somewhat lower than the reported average of R3 million and R2.9 million for the respective packages," states Mabili.

"As indicated last year, IT packages lag in a technology-driven world. This trend seems evident to continue until the IT sector moves into a more stable stage of industry lifecycle."

The gap

Mabili, which offers recruitment and technological solutions, points out that directors' salaries is a hot topic. "The heat is on, and with every mention of the word 'executive pay', directors sigh and brace themselves for another wave of intense public scrutiny."

However, notes the report, South African figures last year were "well below" international levels, a trend seen by the firm in its analysis of 2005 salaries.

"The increases in yearly remuneration are indeed higher than the CPIX rate on inflation and the generally accepted increases afforded to the average worker. While the international trend is that executive pay increase are flattening out, increases of these levels suggest that executive pay has some way to go before reaching a plateau in SA."

On average, cash - or basic remuneration - makes up 52% of total packages, while benefits account for 11% of the average total package. Performance incentives make up another 32% and "other" remuneration makes up the balance.

Mabili cites two issues as cause for concern. The first is a "weak" link between performance and pay, and the second issue is the gap between salaries of executives and those working on the floor.

"The trend of increasing pay gaps sends out a powerful message and does much to marginalise the workers," it said of the report that analysed 184 JSE-listed and parastatal companies that reported revenue of more than R250 million.

Solidarity's report, "Remuneration of Chief Executive Officers: An Overview of JSE-Listed Companies", released in July, found that, while CEOs on average earn between 35 and 53 times more than the total remuneration of the average worker, leaders in the telecommunication industry earn an average of 59 times more than an average worker.

Journalists Ann Crotty and Ren'ee Bonorchis recently published a book on the subject, "Executive Pay In South Africa - Who Gets What And Why". "From what we found, there is little transformation in the boardroom," Bonorchis is reported to have said. "Most of the executives are still white and male, earn on average R15 million a year - more than 700 times the ground workers, who happen to be black and/or women."