The future of remuneration and leadership

Remuneration and management policies are evolving. Any remuneration committee that doesn’t pay attention may find its company at a loose end.

Wage inequity is an ongoing debate in South Africa and around the world, and the jury is still out about what constitutes a living wage.

The wage inequity debate is multifaceted.

There is both vertical and horizontal inequity that needs to be addressed:

  • Vertical meaning pay gaps from the top to the bottom of any organisation; and
  • Horizontal being gender, race, culture, religion or performance-based, for example – anywhere that prejudice exists between employees and employers.

Executive boards and remuneration committees are now faced with an environment where they need to mind their surroundings and be more accountable than they have ever been before. It isn’t all about the bottom line anymore. The modern executive is expected to be more ‘human’.

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In our current reality, directors are facing a more informed public. Both internally and externally, management teams are having to consider the consequences of their actions. From an external point of view, social justice and environmental concerns have taken centre stage (think Shell and its seismic blasting off the Wild Coast).

Internally, broad-based talent retention, new working models and employee wellbeing are just a few of the factors in the ongoing juggling act. Beyond that, Covid-inflicted supply chain concerns, inflation and a plethora of socio-economic forces are at play. So where does it all end, and what exactly would a successful executive case study look like?

Out with the old …

In the age of transparency and open communication, and with the Companies Amendment Bill set to make executive pay gaps public knowledge, executive compensation structures are likely to be in for an overhaul.

Over and above laying the wage gap bare, attracting and retaining the right CEO is going to require some creative thinking and flexibility.

Revised pay models could take shape at various levels, not just executive. Many private equity pay models, for example, reflect lower cash compensation with higher long-term, equity-based compensation – like stock or profit share – and this has been shown to work in several instances.

Read; South Africa is tightening its rules around executive pay, but gaps remain

The ESG conversation

Environmental, social, and governance (ESG) awareness is more widespread than ever. Executives should be closely examining the ESG factors that affect the organisation – both on the inside and out. Governance at board level and executive level, risk management, compliance, behaviours, ethics, values and culture are all in the spotlight.

Greenhouse gas emissions are of great concern in South Africa – the 14th largest emitter of greenhouse gases in the world. As Europe and the United States move toward 2030’s climate goals, there is no time like the present to have robust discussions about sustainability measures that could affect the company’s wellbeing and standing in the long term.

Socially speaking, ‘care’ is the word of the day.

Leadership must be more mindful than ever before of injuries, illnesses, exposure to harmful substances, workplace policies, gender balance, diversity and inclusion, employee engagement, employee voluntary turnover, training and development, behaviours, ethics, values and company culture.

Leading from the trenches

The South African workforce is in a state of flux. Employers are no longer a law unto themselves. Far from it, openness, inclusion and flexibility foster loyalty, productivity and retention. Employment and pay are two-way negotiations and output is directly linked to a more satisfied, adequately compensated staff complement.

The ‘Servant Leadership’ culture creates a meaningful connection that binds all levels of an organisation and breaks down silos.

A Servant Leadership team observes, listens, validates opinions – even from those far subordinate in the hierarchical structure – and encourages a transparent culture characterised by trust and empathy. This approach fosters belonging, inclusion and ultimately better retention.

We never know what the next crisis on the horizon may be. But companies that stand the test of time weather whatever storms erupt by being agile, open and showing empathy to every stakeholder in the company.

Quality leadership always wins

Successful organisations are differentiated by successful people. Before any compensation practices can be addressed properly, leadership, board members, shareholders and stakeholders must share a common culture and the desire to do better for the greater good of the company. This logically leads to better performance across the board and greater rewards for everyone.

Chris Blair is a master reward specialist and CEO of 21st Century.

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