This is where King V’s emphasis on ethical and effective leadership remains relevant. Remuneration is not simply a mechanism for paying people. It is one of the ways leadership intent becomes institutional reality, argues the writer.
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Nqobani Mzizi
Few boardroom decisions reveal institutional values as clearly as remuneration. An organisation may speak persuasively about purpose, fairness, sustainability, ethics and stakeholder trust, but how it rewards leadership often tells a deeper story. Pay reveals what is valued, what is tolerated and what the board is willing to defend.
This is why remuneration should never be treated as a narrow human resources matter. It sits at the intersection of power, performance, fairness and accountability. South Africa’s governance environment has now shifted in this regard.
The remaining remuneration-related provisions of the Companies Amendment Act 16 of 2024 came into effect on 22 May 2026, introducing a more demanding framework for remuneration disclosure and approval. Public and state-owned companies must now prepare remuneration policies and remuneration reports for shareholder approval, with greater visibility of director and prescribed officer remuneration, as well as pay-gap information.
This development signals that remuneration has moved further into the realm of public accountability. Pay can no longer be hidden behind technical language, closed committee deliberations or carefully phrased reports. Boards are now expected to explain how remuneration decisions are made, why they are fair, how they relate to performance and whether they are consistent with the organisation’s purpose and values.
The question is not whether leaders should be rewarded. Competence, responsibility and performance must be recognised. Organisations need to attract and retain capable executives, especially in complex environments where leadership carries real pressure.
The governance issue is whether reward is defensible, proportionate, transparent and connected to sustainable value. Excessive simplicity in this debate is dangerous. Populist attacks on pay can be as unhelpful as uncritical defence of executive reward. The board’s task is to govern the balance.
Remuneration is where power becomes measurable. It shows who benefits from organisational success, how value is distributed and whose contribution is considered material. It can either reinforce a sense of shared purpose or deepen perceptions of unfairness. In unequal societies, pay decisions carry significance beyond the boardroom. They influence employee morale, shareholder confidence, public trust and the legitimacy of leadership.
This is particularly important when organisations face performance pressure, restructuring, retrenchments, service delivery failures or stakeholder dissatisfaction. Even where the numbers comply with policy, the governance question remains: does the outcome make sense in context?
Good remuneration governance requires alignment between reward and the organisation’s long-term objectives. Reward structures that privilege short-term gains while creating long-term harm weaken governance credibility. Incentives that encourage reckless growth, excessive risk-taking, weak controls or superficial performance distort institutional behaviour. Where ethical conduct, stakeholder trust, sustainability and culture are treated as decorative commitments while financial outcomes carry the real reward, the organisation reveals what it truly values.
What boards reward, institutions become. If incentives focus narrowly on revenue growth while ignoring risk, ethics, sustainability, customer outcomes, employee well-being, safety, transformation or ESG commitments, those neglected priorities will inevitably drift to the margins.
This does not mean every incentive plan must be overloaded with every fashionable measure. Overcomplicated scorecards can become meaningless. The challenge is to identify the measures that genuinely reflect the organisation’s strategy, risk profile and stakeholder responsibilities. Boards must be able to explain why their chosen measures matter.
The remuneration committee is therefore one of the board’s most sensitive governance instruments. It protects the credibility of the organisation’s reward philosophy by balancing market competitiveness, performance outcomes, affordability, internal equity, shareholder expectations and wider stakeholder sentiment.
The committee must also resist benchmarking without judgement. While benchmarks have value, they can easily become a self-reinforcing justification for higher executive pay. Boards must use them as evidence, not as an escape from responsibility.
Pay gap disclosure will make this even more important. The new regime requires remuneration reports to disclose, among other things, the highest-paid and lowest-paid employees, average and median employee remuneration and the ratio between the top 5% and bottom 5% of earners. This will not automatically make organisations fairer, but it will make inequality harder to ignore.
Pay gaps are not always unjustified. Different roles carry different responsibilities, skills, risks and market values. The governance issue is whether the gap is understood, justified and responsibly managed. Boards must know what the numbers say, what story they tell and whether that story is consistent with performance, fairness and the organisation’s stated values.
These considerations are especially sensitive for state-owned companies and entities that serve the public interest. Where public resources, essential services or developmental mandates are involved, remuneration decisions carry additional legitimacy implications. Executive reward in such contexts cannot be defended only by reference to market practice. It must also be defensible in relation to performance, service outcomes and public trust.
In the private sector, the same principle applies through a different lens. Shareholders expect remuneration to support long-term value creation, employees expect fairness and transparency, and customers, communities and regulators expect responsible leadership and compliance. The board must navigate these expectations without surrendering judgement.
This is where King V’s emphasis on ethical and effective leadership remains relevant. Remuneration is not simply a mechanism for paying people. It is one of the ways leadership intent becomes institutional reality. If an organisation claims to value sustainability, ethics, innovation, inclusion and stakeholder trust, its remuneration system should not contradict those claims. Incentives must tell the same story as the strategy.
The implementation report is therefore not merely a disclosure document. It is a record of governance choices. It reveals whether the remuneration policy was applied consistently, whether performance was genuinely achieved, whether discretion was used responsibly and whether outcomes are defensible. A remuneration policy may be well drafted, but credibility is tested in implementation.
Discretion is especially important because formulaic outcomes can sometimes produce results that do not feel right. A bonus may be technically payable despite reputational harm, a target may be achieved in a way that undermines culture, or a financial result may appear strong while risk is deferred into the future. In such moments, the board must exercise judgement because mechanical compliance cannot replace governance conscience.
Remuneration also requires transparency without defensiveness. Boards should not communicate pay as if stakeholders are incapable of understanding complexity. They should explain the philosophy, the measures, the outcomes and the rationale. Where shareholders or stakeholders raise concerns, boards should engage meaningfully. Resistance to scrutiny often creates more suspicion than the remuneration itself.
The new approval requirements will test this. Shareholder votes can sharpen accountability, but they should not reduce remuneration governance to a popularity contest. The board must listen, explain and adjust where necessary, while still exercising its fiduciary duties. Accountability requires openness, not surrender.
Ultimately, remuneration is one of the places where governance becomes visible. It reveals whether boards can align power with responsibility, reward with performance and leadership with trust. It forces the organisation to confront what it truly values, beyond the language of purpose statements and annual reports.
Pay will always be sensitive because it sits where money, power and value meet. That is precisely why it must be governed with discipline. The question is not whether leaders should be rewarded. The issue is whether that reward is fair, defensible and aligned with the institution’s purpose, performance and trust.
What boards reward, institutions become. Boards must therefore ensure that remuneration reflects not only what leaders have earned, but what the organisation is prepared to account for.
Nqobani Mzizi is a Professional Accountant (SA), Cert.Dir (IoDSA) and an Academic.
Image: Supplied
* Nqobani Mzizi is a Professional Accountant (SA), Cert.Dir (IoDSA) and an Academic.
** The views expressed do not necessarily reflect the views of IOL or Independent Media.
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