Bonus balloon just gets fatter

Sunday Times Editorial: There is nothing wrong with someone becoming filthy rich if they have changed the face of an industry, built their own business, created thousands of jobs or turned the business they manage into a big and successful organisation.

Most people would not begrudge Steve Jobs, Warren Buffett and Richard Branson their success.

These kinds of people are also to be found in South Africa, and they feature on our Rich List, which we publish in Business Times this week.

But the list also reveals there are many others who are very richly rewarded even though the companies they manage are not doing well.

Among South Africa's top 100 earners, there are only 13 who did not get a performance bonus last year. Yet 39 of the 100 companies they managed reported lower earnings.

This trend is not limited to the private sector. Among the top 50 earners in parastatals, only five did not get performance bonuses, and many of the performance bonuses amounted to much more than their salaries.

This is despite the fact that many of our parastatals are on shaky ground, as is the infrastructure they provide. Many parastatal executives also received increases well in excess of inflation - the 10 highest-paid took home increases of between 40% and 74%. This must be particularly offensive to workers, including civil servants, who are told their increases should match inflation.

At the many companies which are retrenching and requiring employees to work harder and longer for the same, or even less, pay, this list will provide justifiable ammunition for unhappiness and even attack.

Companies, and the big parastatals, argue that they need to pay well to retain top skills. This claim, however, can be challenged, as 21 of the 100 top earners of corporate South Africa in 2010 are no longer in their jobs a year later. At parastatals, the turnover of top executives is even higher.

They also argue, justifying the bonuses, that it is as difficult to manage in good times as in bad. However, the already well-paid executives should and do have bonuses linked to performance - and these should only be earned when this is warranted.

Companies claim to believe in the free market system, where success is rewarded and failure punished - but some choose to ignore this when it comes to enriching their executive team.

Given the state of the economy over the past few years, it is understandable that companies have not fared well. Executives, however, should not be exempt from taking the pain. In fact, as they have the luxury of a big salary to tide them over, they should be the first to show they are prepared to tighten their belts. Instead, as the Rich List shows, their ballooning salaries just smack of greed.