Environment, Social, Governance – or ESG – is gaining increasing interest from stakeholders across the African continent. One of the key governance issues which often catches investors' attention is directors' remuneration and executive pay.

In South Africa, this topic is raising its head under the changes to the Companies Act (“the Act“) that are proposed under the Companies Amendment Bill [B27-2023] which Trade and Industry Minister, Ebrahim Patel, tabled in Parliament on 28 August 2023 (“the Bill“).1

According to the explanatory Memorandum on the objects of the Companies Amendment Bill (Memorandum) (which accompanied the Bill), the Bill among other things seeks to promote equity between directors and senior management on the one hand, and shareholders and workers on the other, and to address public concerns regarding high levels of inequalities in society.2

Pursuant to this ambition, the Bill proposes amendments which according to the Memorandum are designed to achieve better disclosure of senior executive remuneration and the reasonableness of the remuneration. The Bill also includes provisions on transparency in respect of potential pay gaps and the reasonableness of remuneration packages. The objective of these provisions – according to the Memorandum – is to establish an objective benchmark which will assist the public dialogue on director remuneration and executive pay. The Bill also proposes fairly significant amendments to the provision relating to the social and ethics committee. These are designed to address several policy areas, including social and economic development, good corporate citizenship, environmental, health and safety, consumer relations, and labour and employment.3

Some of the more granular level requirements imposed under the Bill include:

  • Clause 5 (which proposes an amendment to section 30 of the Act) which provides that where a director or prescribed officer of the company (that is required to have its annual financial statements audited) receives remuneration and benefits, that director or prescribed officer must be named.
  • Clause 6 (which proposes to insert a new section 30A in the Act) which provides that a public company or state-owned company must prepare and present a company's remuneration policy and remuneration report for approval by ordinary resolution at the annual general meeting (AGM). The policy must be approved every three years after the initial AGM or whenever the company wishes to make any material change to it. The clause also includes requirements on the content of the remuneration report, how the report must be implemented, the level of support which it must obtain at the AGM and the consequences if the report fails to garner the required support.
  • Clauses 12 and 13 (which respectively propose amendments to section 61 and 72 of the Act). In respect of the former, the Bill proposes to introduce the requirement that a public company's social and ethics committee must provide a presentation on the remuneration report during the AGM. The latter seeks to amend the current mechanisms provided for under section 72 of the Act which enables public or state-owned companies to approach the Companies Tribunal for an exemption from the duty to appoint a social and ethic committee. The revised wording now sets out the requirements for granting the exemption, the appointment and composition of the social and ethics committee, the filling of a vacancy, and the presentation of the social and ethics report at the AGM..

If the proposed amendments are adopted in their current form, public companies and state-owned companies in South Africa will have to include, among others, the following information in their remuneration report:4

  • the company's remuneration policy, set out as a separate part of the remuneration report;
  • an implementation report containing details of remuneration and benefits received by each director or prescribed officer;
  • the total remuneration, including all salary, benefits, employer contributions to benefit funds, short-term incentives or bonuses and long-term incentives (i.e. share options), of an employee within the company with the highest total remuneration (i.e. any executive or prescribed officer);
  • the total remuneration, including all salary, benefits, employer contributions to benefit funds, incentives or bonuses, as recorded on the company's payroll record, of an employee within the company with the lowest total remuneration; and
  • the average remuneration of all employees, median remuneration of all employees and the remuneration gap reflecting the ratio between the total remuneration of the top five per cent highest paid employees and the total remuneration of the bottom five per cent lowest paid employees of the company.

During the last year we have seen significant changes to sustainability reporting and disclosure obligations around the world, be it the compulsory obligations imposed under the European Union's Corporate Sustainable Reporting Directive or the voluntary frameworks created under the International Sustainability Standards Board's IFRS S1 an S2.

The requirements imposed under these legal instruments mirror the approach adopted under the JSE's Sustainability Disclosure Guidance (published in June 2022), which is aligned with, and draws on global initiatives such as IFRS S1 and S2, the GRI Sustainability Reporting Standards, the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations, and the IIRC's International Framework. Different from the voluntary framework provided under the JSE's Sustainability Disclosure Guidance, the Bill seeks to impose mandatory disclosure requirements. If South Africa's listing rules and company laws follow international trends, the proposed amendments may well be the first steps in significant changes to the country's sustainability reporting and disclosure framework.

Interested and affected persons have until Monday, 2 October 2023 to submit comments on the proposed changes to Parliament's Portfolio Committee on Trade and Industry.


1. The Companies Amendment Bill, 2023, available at https://www.parliament.gov.za/storage/app/media/Bills/2023/B27_2023_Companies_Amendment_Bill/B27_2023_Companies_Amendment_Bill.pdf

2. See page 13 of the Memorandum on the objects of the Companies Amendment Bill

3. The policy areas are those mentioned in The Social & Ethics Committee Handbook which is available online at https://www.saipa.co.za/wp-content/uploads/2017/07/SEC-Handbook-WEB.pdf

4. Ibid at section 6(3) (a) – (f).

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