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Nedbank Limited Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16). 1
King IVTM: “Grasping the Nettle”
SARA Conference, 3 NovemberRay Harraway
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Agenda
The context
“The nettle”
The how
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Context: The forces of change
What is driving change
in remuneration?
How should
this affect your
agenda?
Context: The forces of change
“Societal tensions are rising” McKinsey Quarterly 2017
The impact of automation
The rising tide of progress has
not lifted all boats equally
From jobless growth
to less job growth
A licence to operate
A new societal deal
“CEOs will need to do more to embed
societies concerns in their business
principles” Unilever CEO Paul Polman
“To win in the marketplace you
must first win in the workplace"
Total workforce costs typically represent over 70% of
an organisation’s operating expense but 86% of
organisations are unaware of their total reward
package
Does pay really
drive performance?
King IVTM
Apartheid has essentially persisted in economic form, NY Times October 2017
74%
of Generation Z agree
that business has a
responsibility to
create a better world
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Context: Some focus points
• Low growth
• Building blocks: PMManagement
• Performance linkage
• King IVTM: policy & enforcementRemco
• Acts: Companies, Tax, EE
• JSE & enforcementRegulator
• Voice & media
• Share registers & proxy advisorsStakeholder
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Context: King IVTM on remuneration
One principle “The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term”
Three practices• Remuneration policy
• Remuneration report
• Voting
Some implications
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Context: Principle 14
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Integrated thinking: 6 capitals, non-financial
Transparency on targets in a VUCA world
Stakeholder, implementation risk
Fair & responsible: 1st Q’s, art & science
To tackle a difficult problem boldly
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Grasping the nettle
What then is fair & responsible pay?
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The “Nettle”
Fair Responsible
Fair Responsible
Ethics
• Impartial
• Rational
Economics
• Sustainable
• Approved
What then is fair & responsible pay?
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The “Nettle”
Source: EY IoDSA Remco Forum Position Paper 4
“What should have been
paid actually was paid "
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The How
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The How
• How much is enough?
• The problem with pay ratios
• A pay index…
95%
100%
105%
110%
115%
120%
125%
130%
135%
2010 2011 2012 2013 2014 2015 2016 2017
CEO GP Average Employee GP TSR
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The How: An outcome
Source: EY IoDSA Remco Forum Position Paper 4
14
Ask yourself this…
Why do we have deferrals, claw-backs, EPWEV, MSRs, and malus? And conduct risk legislation
Does your remco review “performance” information?
Do you adjust ROE performance with no AFS recon?
Do your corporate executives understand their pay?
Do you remunerate as if they are entrepreneurs?
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Which line are we about to cross?
ETHICAL MINDLESS
MUST
SHOULD
☺
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Finally: more pay compliance means…
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STRIVE for
Sustainable
Stretch
Simplify17
So what can we do?
18
THANKYOU
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