TRACEY DAVIES: PwC waves magic wage gap wand
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In one fell swoop, PwC appears to have eliminated SA’s socially destabilising wage gap. The auditing firm’s recently released "Practices and Remuneration Trends Report — Executive Directors" analyses publicly available information on executive remuneration at JSE-listed companies for the period May 1 2019 to February 29 2020.
PwC concludes that the median pay of a JSE CEO is only 18 times that of a semiskilled employee, and 24 times that of an unskilled employee. The gap between CEO pay and the national minimum wage — acknowledged by PwC to be insufficient to support a decent standard of living — is presented as a rather reasonable 66 times.
How does PwC achieve this feat of making the wage gap look relatively acceptable, in a country the World Bank considers to have the highest income inequality in the world? It uses only total guaranteed pay (TGP) as its base for comparison, and ignores by far the most significant components of executive pay: short-and long-term incentives.
According to PwC, the median TGP for the CEO of a JSE-listed company is R5.2m, or R2.8m after tax. According to PwC salary surveys, the semiskilled median wage is R200388 a year (R164318 after tax), and the unskilled median wage is R146832 (R120402 after tax). The national minimum wage of R43596 is not taxed, as it falls below the R83100 tax threshold.
This gives PwC its ratios of CEO pay as 18, 24 and 66 times that of these three pay categories.
However, it is hugely problematic to represent TGP as a realistic figure for comparison. The rule of thumb is that TGP represents about a third of the total value of a CEO’s remuneration package, with short-and long-term incentives each making up an additional third. Even this sometimes overstates the value of TGP. So, on average, PwC has made about two-thirds of CEO pay disappear.
Pay gap surveys in other parts of the world do not use TGP as the basis for comparison. PwC itself strangely compares SA’s pay gap with the "CEO-to-average-worker pay ratios" in the US (287:1) and the UK (117:1), which are based on total pay, not guaranteed pay.
To illustrate the problem, consider SA’s most extreme example: Naspers. Using PwC’s approach, CEO Bob van Dijk’s remuneration for the year to March 2020 — his TGP — was R23.46m. The additional R252m that Van Dijk received in short-and long-term share-based incentives and "other ...
PwC concludes that the median pay of a JSE CEO is only 18 times that of a semiskilled employee, and 24 times that of an unskilled employee. The gap between CEO pay and the national minimum wage — acknowledged by PwC to be insufficient to support a decent standard of living — is presented as a rather reasonable 66 times.
How does PwC achieve this feat of making the wage gap look relatively acceptable, in a country the World Bank considers to have the highest income inequality in the world? It uses only total guaranteed pay (TGP) as its base for comparison, and ignores by far the most significant components of executive pay: short-and long-term incentives.
According to PwC, the median TGP for the CEO of a JSE-listed company is R5.2m, or R2.8m after tax. According to PwC salary surveys, the semiskilled median wage is R200388 a year (R164318 after tax), and the unskilled median wage is R146832 (R120402 after tax). The national minimum wage of R43596 is not taxed, as it falls below the R83100 tax threshold.
This gives PwC its ratios of CEO pay as 18, 24 and 66 times that of these three pay categories.
However, it is hugely problematic to represent TGP as a realistic figure for comparison. The rule of thumb is that TGP represents about a third of the total value of a CEO’s remuneration package, with short-and long-term incentives each making up an additional third. Even this sometimes overstates the value of TGP. So, on average, PwC has made about two-thirds of CEO pay disappear.
Pay gap surveys in other parts of the world do not use TGP as the basis for comparison. PwC itself strangely compares SA’s pay gap with the "CEO-to-average-worker pay ratios" in the US (287:1) and the UK (117:1), which are based on total pay, not guaranteed pay.
To illustrate the problem, consider SA’s most extreme example: Naspers. Using PwC’s approach, CEO Bob van Dijk’s remuneration for the year to March 2020 — his TGP — was R23.46m. The additional R252m that Van Dijk received in short-and long-term share-based incentives and "other ...
