A Comparative Critical Analysis of the Effectiveness of Remuneration Committees in the determination of Executive Remuneration in South Africa

Abstract

Over the years, executive remuneration has been significantly increasing, and several jurisdictions have established specific corporate governance measures to manage this remuneration. Establishing effective remuneration committees is one of the measures that could be used to curtail the spiralling of executive remuneration. This article examines the role of remuneration committees, their effectiveness in setting executive remuneration, and how they are regulated in South Africa. The article aims to determine whether and how to enhance the use of these committees by South African companies. It examines how these committees are regulated by the Companies Act 71 of 2008, the JSE Limited Listings Requirements, and the King IVTM Report on Governance for South Africa, 2016. It also compares how the United Kingdom, Australia, and the United States of America regulate the use of remuneration committees in their corporate governance regimes. The article contends that remuneration committees have as yet not been effective in monitoring executive remuneration in South Africa because this remuneration has not generally been seen to decrease or to be linked to company performance. The article further contends that the ineffectiveness of remuneration committees to regulate executive remuneration is due to insufficient regulation of these committees. The article makes recommendations to enhance the regulation and effectiveness of remuneration committees in South Africa.