BUSINESS NEWS
Exec salaries hikes double inflation
Posted Thu, 10 Aug 2006
Executive salary increases were double the average inflation rate for 2005 to 2006, annual research by Deloitte revealed on Tuesday, as executive talent shortage has become 'manifest' in South Africa.
According to Deloitte, this came in spite of the fact that last year's research indicated that the executive salary hikes were likely to be only slightly above inflation.
The research, entitled 'The SA Guide to Executive Remuneration and Reward', was conducted by Human Capital at Deloitte among a wide range of companies in many different sectors.
"The intention was probably to stay close to the inflation rate and general staff increases, but market forces dictated that premiums were required to attract and retain top talent, resulting in considerable variability in the increases that were granted," said Louise Marx, manager for Human Capital (Benchmarking) at Deloitte.
She added that 21 percent of organisations experienced extreme difficulties in recruiting
executives — "The talent shortage in this country is becoming manifest in this area", she said.
Sales and marketing lost the most executive to emigration, with 39 percent of the respondents saying they had lost personnel. 16 percent of manufacturing, production and operations departments said they lost executives.
Most of the lost executives headed for the United Kingdom (25 percent), followed by Australia, Europe and New Zealand (at 19 percent each).
The chief reason cited for emigrating was ‘Better employment opportunities abroad’ (46 percent), with company transfers being the second most common reason at 39 percent.
"We are certainly seeing the effects of a skills shortage in the executive market. Replacement costs for these people are also very high, so it is understandable that companies will do their best to retain top talent," said Marx.
Staff salary increases were somewhat lower than their executives, according to a separate Deloitte
survey published earlier this year. General staff salaries increased by one and a half times average inflation, less than that received by executives.
According to Marx, "Another notable finding was the fact that 55 percent of companies have implemented executive retention strategies to mitigate executive turnover. This figure has increased substantially from the 39 percent reported last year."
Commenting on the future of share schemes, the report found that the year under review has seen debate around the tax implications and accounting treatment of these schemes. As a result, many companies have addressed the design of their share schemes, with the demise of the previously popular share option scheme.
Non-executive directors' remuneration was also included in the analysis, Deloitte said, which found that 20 percent of organisations surveyed include performance standards and requirements in the non-executive chairperson and directors' contracts.
"In contrast to 14 percent in 2005, 56 percent of the companies surveyed link remuneration to the achievement of performance criteria set out in the contracts,” Marx said.
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