EDITORIAL | New bill a much-needed antidote to tense employer-employee relations

The publication this week of the Companies Amendment Bill is a welcome step in the quest to promote transparency and better relations between employers and employees in an economy where distrust has historically run deep.

The bill, approved by cabinet, aims, among other things, to reduce the regulatory regime on businesses, tighten anti-money laundering gaps, strengthen the disclosure requirements and enhance shareholder power in a company.

But it is on the question of executive remuneration that the proposed change holds promise for the improvement of the relationship between key economic stakeholders — business and labour. The legislation will mandate the disclosure of earnings of top executives, such as CEOs and CFOs.

While it may seem like an intrusion into the management prerogative, it will bring us in line with progressive international trends.

The proposed change should begin to deal with what trade, industry and competition minister Ebrahim Patel has described as “the gross injustice of excessive pay”. While employers might not agree with his description, they cannot be blind to the negative impact on shop-floor relations of huge gaps between what the bosses earn and what they pay their employees.

A recent survey showed that, on average, the highest paid CEOs on the JSE earned about R24m a year, in contrast with SA’s minimum wage of about R20 an hour.

The secrecy shrouding top executives’ pay can only engender and entrench distrust between management and labour.

The secrecy shrouding top executives’ pay can only engender and entrench distrust between management and labour. Hopefully the new legislation will shine the spotlight on pay inequalities within companies and in the broader economy.

Given our dubious reputation of being among the most economically unequal countries in the world, the new legislation is likely to lead to a level of restraint in setting pay levels for company executives and directors, as well as open the door to discussion between all parties about how to narrow the pay gap.

For those engagements to succeed, a level of trust will first have to be established, which greater pay transparency should foster.

Second, those engagements will by definition have to involve agreeing trade-offs that have to be made between employers and labour, including upskilling workers and improving productivity as workers’ pay levels rise.

Because of our history of economic exclusion, discrimination and inequality, shop-floor relationships have tended to be adversarial rather than co-operative. Important stakeholders in the economy, particularly organised labour and business, have found it hard to forge a commonality of purpose.

In the absence of this and co-operation, our economy’s meaningful growth, as well as its global competitiveness, will remain elusive.

The key is to ensure that, ultimately, all stakeholders, not just business, benefit from a growing and competitive economy.