These are the words of Cell C CEO Jose Dos Santos on Cell C’s web page. He is one of the three Cell C’s executive directors who were collectively paid R219 million in the 2017 financial year. This, at a time when the 3 000 Cell C employees were informed that they were not going to be receiving bonuses because the company had not met its EBITDA 2017 targets.
Adding salt to the situation, TechFinancial’s Gugu Lourie, reported on 28th September that Hilton Coverley, Cell C’s Executive of Informal Channel, had allegedly stated: “I do not understand why there is such a f*g noise regarding the monies that have been paid out, both internally and in the media. As far as I am concerned, it is like belonging to a club, such as a golf club, and when the club faces relegation, a team is selected to go out and get money to save the club from relegation. If that team has performed in securing money then those individuals must be paid … If the team is saved from relegation, then those people must be (curse word) get paid. We saved 3 000 jobs.”
If this statement is to be believed, it smacks of arrogance and out-of-touchness with what makes the actions of boards legitimate. Even using a golf club analogy can be construed as being in very bad taste.
In effect, the executives paid themselves a large amount for saving a company that they had got into difficulty. No wonder the employees who are supposed to be part of the Cell C culture of achieving together, were outraged by the amount of no less than R73 072.33 per person being placed on their heads for each of the 3 000 jobs “saved”, as were several other stakeholders, all of whom are asking for answers.
At the heart of this are issues of perceived greed and behaviour that is not in the company’s best interests, but in the interests of a few. In an unequal society these amounts of money are indefensible irrespective of the executive spin and it once again raises the issue of rich executives getting richer in a highly unequal society.
Yes, the King Code is clear that senior executives need to be fairly remunerated for a number of reasons, including the responsibility and stress they carry, and they can be hired and fired in a short space of time. But how much is fair remuneration and how much value can justifiably be placed on the work of senior executives who aren’t entrepreneurs or haven’t put their own security on the line for collateral? It’s a complex issue, and most reasonable people would consider fair remuneration to be well deserved.
In PwC’s 10th edition, 2018 Executive directors – practices and remuneration trends report, it points out that there is a common misconception that shareholders can overrule what the board recommends when it comes to directors’ remuneration. This is not the case, as there is something called a non-binding advisory vote by the shareholders. There are critics of this who believe this to be ineffective, but the King Committee felt that shareholders cannot do the work of the remuneration committees, which are entrusted to do the homework on what is fair remuneration.
King does, however, advise boards to engage with shareholders who have objected to remuneration proposals, to find out what the objections are about, as railroading of shareholders will have undesirable and unintended consequences down the line. Tables published in the PwC report show that large institutional investors, including Old Mutual South Africa (37% against) and the Public Investment Corporation (44.9% against) are increasingly voicing dissatisfaction with the levels of remuneration.
If the non-binding advisory vote of shareholders is not taken seriously, they are going to demand more, notably to move from an advisory non-binding vote to a binding vote situation, which I believe we should try and avoid so that the work of remuneration committees is trusted.
The report goes on to say: Remuneration paid to executive directors must be justifiable to all stakeholders, not just the shareholders, and recent corporate failures have called into question, inter alia, whether companies have adequate risk adjustment mechanisms in place for executive remuneration. Benchmarking methodologies need to be developed further, and companies need to take gender equality more seriously in all areas, including in eliminating unjustified pay differentials. Fair and responsible remuneration is a concept that must be implemented in relation to employees across an organisation, and pay conditions for junior employees must be given special focus.
At a recent talk, I attended, given by Wits University’s Vice-Chancellor Adam Habib he emphasised the importance of inclusive behaviour, in contrast to islands of extreme prosperity that are disengaged from society. To perpetuate this island myopia means that too many senior executives are insensitive to- or out of touch with their employees, they are out of touch with how the majority of people live, or the state of our public schools and public hospitals.
To address this, perhaps CEOs and Senior Executives who earn stratospheric salaries need to come face to face with the majority of their employees on a regular basis. As it stands, many have separate offices, separate entrances and separate executive boardrooms. It’s the corporate version of the security estate but it’s not sustainable and it certainly doesn’t build a strong sense of camaraderie and loyalty in the company. And it’s a global phenomenon.
Money magazine reports that American CEOs are paid 271 times more than the average worker pay, and that Jeff Bezos of Amazon earns in 9 seconds what the median employees earn in a year. He’s a fantastic entrepreneur who has built a remarkable company, and while he has said he’ll be giving billions away for philanthropy, as others have, the call has been made that perhaps he should start by paying Amazon staff more. Which is precisely what he did on 2 October when he announced that the minimum wage would be raised to $15 from 1 November (regarded as a living wage) for all US Amazon employees, some 250 000 of them, and a further 100 000 seasonal employees.
In a CNBC online article it said: Amazon's starting pay varies by location — $10 an hour at a warehouse in Austin, Texas, for example, and $13.50 an hour in Robbinsville, New Jersey. For 2017, the median Amazon employee earned just under $28,500, according to company filings.
"We listened to our critics, thought hard about what we wanted to do, and decided we want to lead," Bezos said in a statement. "We're excited about this change and encourage our competitors and other large employers to join us."
Some people argue that it will lead to job losses, others argue that it will boost the economy. At the end of the day, it can be argued one way or the other without ever coming to a resolution, but the message is if inequality increases, and senior executives are awarding themselves ever larger earnings, then organisations will have to deal with employees who have no commitment or belief in the organisation.
There is no point in talking about inclusive, caring corporate cultures, and expecting total commitment from employees when they are made to feel grateful they have a job instead of feeling valued, motivated and rewarded.
It is time to get real.
Four years ago, American billionaire Nick Hanauer articulately summed up the situation in the following article in Politico magazine (https://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014) and I’m quoting excerpts from it here: I am one of those .01%ers (of global super rich), a proud and unapologetic capitalist. I have founded, co-founded and funded more than 30 companies across a range of industries—from itsy-bitsy ones like the night club I started in my 20s to giant ones like Amazon.com, for which I was the first nonfamily investor. Then I founded aQuantive, an Internet advertising company that was sold to Microsoft in 2007 for $6.4 billion. In cash. My friends and I own a bank. …I’m not the smartest guy you’ve ever met, or the hardest-working. I was a mediocre student. I’m not technical at all—I can’t write a word of code. What sets me apart, I think, is a tolerance for risk and an intuition about what will happen in the future. Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now? I see pitchforks…The divide between the haves and have-nots is getting worse really, really fast. …And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last. If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.