South Africans have probably tired of trying to make sense of the legislation-making process in this country and so, when the long-awaited Companies Amendment Act was gazetted on the last Friday of 2024, deep in the midst of the holiday season, those who noticed may have just shrugged.
And, if they were smart, reverted to holiday mode. They will need all the rest they can get; the next several months are likely to be stressful as corporate governance systems are adapted to the demands of the new law.
Those who looked closely at the somewhat haphazard announcement in the Government Gazette will have noticed that a few sections have not been promulgated. Most significantly, the controversial sections 30A and 30B relating to remuneration disclosure.
So, did the business lobby win out? Did they persuade the new government that the South African public would be better off not knowing the details of the gap between the excessively well paid and the poorest paid in the country? And was the government persuaded that voting on two toothless, advisory resolutions at AGMs qualifies as significant shareholder oversight over the country’s richest gravy train?
Not so, says Matthew Parks, Cosatu’s parliamentary co-ordinator. He argues that there actually wasn’t that much pushback on the remuneration section of the Companies Amendment Act.
Parks, who has an encyclopaedic knowledge of the legislative process as it wends its way through parliament, explains that the more straightforward sections of the act were promulgated on December 27. “But some sections of the new act need regulations and can’t be promulgated until those regulations are in place,” he tells Currency.
Section 30 needs regulations to guide the implementation of the new legislation. Given the time involved in drawing up regulations, this means the tougher new disclosure and oversight legislation relating to remuneration is unlikely to see the light of day much before the end of 2025. In turn, this means it will be another 18 months or so before companies start disclosing the details of their pay gaps or before they hold binding votes on remuneration.
Parks is a bit more optimistic on the timeline and thinks the regulations could be in place by June.
The problem is that once the draft regulations are drawn up, there must be time for the public to comment. And the fact is it has taken five long months for the act, which was signed off by President Cyril Ramaphosa at the end of July, to be promulgated. There’s no reasonable excuse for that delay, given that there was absolutely no requirement for comment from anyone.
Essentially, at this stage few people will even bother to guess how long it might be before the public gets sight of legally required pay-gap details – or before shareholders get a binding vote on remuneration.
The good news is that on the pay-gap front, the lack of disclosure hasn’t stopped activist shareholders such as Just Share from drawing their own conclusions from publicly available information on industry sector pay levels.
Enter the consultants
Whatever happens, the new legislation is good news for the army of consultants who power the remuneration industry. In terms of the current legislation only state-owned companies and JSE-listed companies are required to have remuneration policies and to implement those policies. The new legislation will require ordinary (unlisted) public companies to have remuneration policies and to implement them. Compiling these dense documents will need input from the same consultants who have worked tirelessly to ensure the remuneration policies of listed companies are dense documents that usually run to a tedious 80-odd pages.
As for the switch to the binding vote on remuneration, that is continuing to cause a few jitters and is likely to be used to justify increased fees for members of remuneration committees. Ahead of the switch the only consequence of a 25%-plus vote against the non-binding resolution is that management has to engage with the disaffected shareholders. Once section 30 is promulgated, if 50% or more shareholders vote against the remuneration policy, it cannot be implemented. And, at the following year’s AGM, the remuneration committee members must stand for re-appointment to the committee.
If the rejected report has not been amended sufficiently to secure approval at the second AGM, the remuneration committee members will have to stand down and will not be eligible to serve on the remuneration committee for two years. They can remain on the board.
All in all, it looks as if 2025 will be a busy year for corporate bureaucrats and, similar to the past 24 years, a hugely rewarding one for remuneration consultants.
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