Companies Can Find Themselves in Hot Water with Authorities and Shareholders: Following Newly Legislated Disclosure on Pay Gaps

The recent signing into law of the Companies Amendment Act by President Cyril Ramaphosa, will significantly impact public companies and shareholders alike as it requires disclosure of the earnings gap between their highest- and lowest-paid workers.

These amendments seek to address the persistent issue of pay disparity in South Africa, known as one of the most unequal societies in the world. Reports on remuneration inequality between executive-level employees and their lower-level counterparts in different sectors of the economy, are nothing new.

The legislated changes are aimed at enhancing remuneration reporting by providing greater transparency and detailed information about the justification for compensating directors and prescribed officers. This detailed information will empower shareholders to advocate for fairer remuneration practices and reforms where necessary and make informed decisions at the Annual General Meeting (AGM).

By requiring the disclosure of executive remuneration and the pay gap between directors and employees, companies will be held to higher standards of transparency and accountability.

For companies, it is crucial to recognise that non-compliance with these new reporting requirements may lead to regulatory scrutiny and reputational damage.

Companies must prioritise accurate reporting and engage in constructive dialogue with shareholders about their remuneration policies. Therefore, both companies and shareholders are encouraged to seek professional advice, as it is crucial for staying informed about these changes and understanding their implications in this evolving landscape.

The New Bill?

The amendments apply to public and state-owned companies who will in future be required to disclose the following information:

• The remuneration of the highest-paid employee
• The remuneration of the lowest-paid employee
• Average remuneration across the company
• Median remuneration
• The gap between the top 5% highest-paid employees and the bottom 5% lowest-paid employees

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