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ORGANISED labour has strenuously stated its case for a 75 percent shareholder majority to vote on remuneration implementation in companies rather than the current 50 percent plus 1 percent, the only sticking point in the amendments to the Companies Bill, which is due for publishing tomorrow for public comment, flighted by Department of Trade Industry and Competition Minister Ebrahim Patel.
He also said the buzzword of the amendments to the bill was greater transparency.
Briefing the media on the amendments yesterday, Patel conceded that organised labour opposed the approvals of business forums – including Nedlac and Business Unity South Africa – on the voting power of shareholders on major resolutions affecting remuneration in the workplace.
The bill largely seeks to enable the ease of doing business, enforce more transparency in pay rations between the lowest and highest 5 percent pay hierarchy in firms as well as to foster clarity on provisions on beneficial ownership in light of the global effort to address anti-money laundering and financing of terrorism.
The bill will be out for public comment for 30 days before being taken through the legislative process involving Cabinet and Parliament.
“The option favoured by business is for ‘on-target remuneration’ of executives to be used to take away peaks and valleys caused by the payment of certain bonuses and allow for better yearly comparison.
“The option favoured by labour is for the use of executives’ actual annual remuneration. It believes that the actual remuneration received by executives should be used to show the real pay gap between the highest and lowest paid employee every year,” Patel said.
He said proposals made would require companies to publish details of their highest paid employee, their lowest paid employee, their average remuneration, their median remuneration and the gap between the top 5 percent highest paid and the bottom 5 percent lowest paid employees.
Patel said while neither the bill nor the government sought to determine the pay ratios, the buzzword was transparency, which was at the heart of protracted disputes between shareholders, executives and workers.
“Consideration needs to be given as to whether ratios should reflect pre-tax or post-tax remuneration and public comment on this issue is also invited.
“Transparency in respect of beneficial ownership reporting is becoming a matter of concern internationally. In both the US and the EU, efforts have been made to address the matter of the identity of the holders of the beneficial interests in a company,” Patel said.
On combating money laundering and the financing of terrorism, the bill seeks to par South Africa’s reporting standards to international best practices on which ownership transparency advocacy groups and proposing a lower threshold for publication of information to be in line with current international trends.
A number of countries have applied lower thresholds recently including Argentina (1 share or above), Senegal ( 2 percent), Nigeria (5 percent), Paraguay, Kenya and the Cayman Islands are at par at 10 percent.
“At Nedlac, there is consensus between business, labour and government on the requirement on a company to disclose information only in instances where the threshold of 5 percent or more is exceeded, the purpose of many of the proposed amendments is to overcome difficulties,” Patel alluded.
South Africa’s rating is number 6 in the Mutual Evaluation Assessment of the country’s anti-money laundering and combating the financing of terrorism pointed to weaknesses in determining the true owner of shares in companies.
Michael Katz, the chairperson of the Amendment Review Committee, said a significant amendment was proposed dealing with buybacks by companies of their own shares in excess of 5 percent of the issued share capital of a company or class of shares of the company.
“The approval of any such buybacks by means of a special resolution is currently required.
“Such a requirement would be entirely unnecessary where the buyback occurs on a recognised stock exchange or is pro-rata to all shareholders,” Katz added.