Executive Remuneration – will it recover to pre credit crunch levels?

Disclaimer: Please note that this article is at least 12 months old.
Any information herein was accurate when published on 9 March 2009

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The call by global and local governments' to cap executive salaries and to clamp down on bonuses – particularly those payable for 2008 when the credit crisis wiped billions of dollars off stock exchanges around the world – is set to change the nature of executive pay for ever.

This is the opinion of Mark Dunn, Director Risk Management of the Johannesburg operation of leading global audit firm BDO. "Gone are the days of salaries and bonuses being set at or about the ‘perceived value of the executive'," he says. "Government bail-out packages will see governments around the world starting to act as shareholders and impose more control on executive remuneration. Shareholders across the board will insist upon well thought through remuneration policies that are more transparent and more substantial," he says.

According to Dunn historically executives operating in "sweet spot" industries - such as mining entities reliant on strong commodity prices – benefited from exorbitant salary/bonus combinations. However the strength or weakness of commodity prices and the resultant impact on the entity's results was clearly outside of the control of the executive team. Remuneration committees globally will be under more pressure to report to shareholders and boards of directors, and will be forced to establish a framework that stands up as well in good times as it does in tough times," he says.

Commenting on the release of the King III corporate governance report, Dunn says that South African companies have seen the rules on remuneration policies being tightened up. "Executive remuneration and remuneration committees have been placed under the spotlight," he says. "Gone are the days of the old boys club. Executive remuneration committees must now take cognizance of King III to guide them in creating a remuneration framework that will be debated by the board prior to its approval.

If you would like to discuss the impact of the global credit crunch on executive salaries globally and locally and King III on South African companies, I would be happy to arrange an interview.

Disclaimer: Please note that this article is at least 12 months old.
Any information herein was accurate when published on 9 March 2009