Dr Mark Bussin, EXCO member of the South African Reward Association (SARA), says that powerful international trends are changing the governance and remuneration landscape significantly.
“These trends are ushering in a profound shift in how we think about governance and remuneration, and smart boards and executive teams need to understand their implications,” he said. “Many of them are developing trends, so companies will need to keep their eye on the ball, and develop flexible strategies to respond to a shifting set of variables.”
Dr Bussin said that while there are multiple trends, the following are the most important as they represent key directional shifts:
Institutions and regulators flex their muscles
Underlying many of these trends is the indisputable fact that both institutional investors and regulators are getting much more specific about what they want from companies in which they are invested. In particular, advisors like Lewis Glass and Institutional Shareholder Services are gaining more influence as they provide advice to large clients, and their agendas are thus gaining traction. Key agenda items include ESG and human capital measurement.
ESG becomes a board matter
Environment, social and governance (ESG) reporting has become mandatory globally. “The move to include non-financial metrics is positive, as it supplements traditional backward-looking and quantitative financial metrics with a new set that are essentially forward looking and qualitative,” he said.
“However, measurement is much more difficult and there’s no real objective way of doing it yet."
Pressure to simplify remuneration
Variable remuneration frameworks designed to drive performance have become so complex that it has become virtually impossible to establish what anyone really earns, and so benchmarking cannot be done.
By Sindile Mhlanga
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