Nicole Martens, Executive Director at Just Share
Recent amendments to the Companies Act mark a significant step forward in South Africa’s long-running effort to strengthen oversight of executive remuneration. For years, investors, civil society and governance practitioners have raised concerns about excessive pay, weak alignment with performance and the persistence of extreme wage gaps. The move to introduce binding shareholder votes on remuneration policy and implementation reflects sustained pressure to address these flaws.
This is progress. But it is not a silver bullet.
There is a risk that regulators, companies and investors treat these amendments as a complete solution to what is, in reality, a deeply embedded problem in how corporate incentives are structured. The legislation creates stronger mechanisms for accountability. It does not, on its own, change behaviour, incentives or culture.
If the reforms are to succeed, they will need to catalyse a shift in how remuneration committees and investors approach pay. Too often, short-term incentives have been used to solve short-term problems, with insufficient regard for long-term sustainability. That approach has contributed to outcomes that reward executives generously even where long-term value creation remains uncertain, while doing little to address widening disparities between executive pay and worker wages.
Binding votes may begin to change this dynamic. They create real consequences for boards that fail to secure shareholder support. But expecting an immediate shift towards long-term thinking may be optimistic. Entrenched practices take time to change.
In the interim, proactive and constructive engagement between companies and investors will be critical. Companies should not wait for shareholder dissent to reach a formal threshold before engaging on remuneration concerns. Early dialogue can surface issues, build alignment and avoid the kind of last-minute conflict that undermines trust and weakens outcomes.
It is therefore difficult to understand the Johannesburg Stock Exchange’s proposal to raise the shareholder dissent threshold for triggering engagement from 25% to 50%.
At a moment when stronger accountability mechanisms are being introduced, raising the bar for engagement moves in the opposite direction. Even at the current 25% threshold, shareholder opposition has often struggled to drive meaningful change. A 50% threshold sets a level that will be hard to reach in practice, particularly in companies with concentrated ownership or low levels of active voting. While the latter is a problem, the former is a particular challenge. South Africa’s listed market is characterised by concentrated ownership, with large institutional investors and controlling blockholders often holding stakes large enough to determine voting outcomes before smaller shareholders have had their say. In that environment, even a 25% dissent threshold can be functionally unreachable. Raising it to 50% does not merely set a higher bar – in many companies, it removes the bar entirely. The result risks being fewer engagements, not better ones.
That would be a mistake. Now more than ever, there is a need for robust engagement to ensure that remuneration policies reflect the spirit of the legislative changes – namely, improved accountability and better alignment between pay, performance and broader societal expectations.
Even if the threshold is ultimately raised, both companies and investors should resist treating it as a signal to disengage. The absence of a formal trigger does not remove the responsibility to engage. Decisions taken now on remuneration structures will shape incentives, behaviours and outcomes for years to come.
Investors, for their part, must also step up. Binding votes carry greater weight and potentially more significant consequences than advisory votes. That should not lead to caution or reluctance to oppose problematic pay structures. On the contrary, it places a greater responsibility on investors to exercise their voting rights thoughtfully and consistently, in line with long-term value creation and fair pay principles.
There is also a risk that companies respond defensively, seeking ways to avoid accountability rather than embracing the intent of the reforms. Practices such as reshuffling committee membership to deflect responsibility would undermine confidence in governance processes and run counter to the purpose of the amendments.
Ultimately, the success of these reforms will depend less on the letter of the law and more on whether its spirit is embraced. South Africa’s approach to executive remuneration has long been out of step with its socioeconomic context. Addressing that misalignment requires more than regulatory change. It requires a shift in mindset – from short-termism to sustainability, from minimal compliance to genuine accountability, and from narrow executive focus to a broader view of fairness within organisations.
The Companies Act amendments create an opportunity to move in that direction. It is now up to regulators, companies and investors to ensure that the opportunity is not lost.
ENDS
