President Cyril Ramaphosa has signed amendments to the Companies Act into law
Image: Independent Newspapers
President Cyril Ramaphosa has signed sweeping amendments to the Companies Act into law, tightening governance rules around executive pay and forcing greater transparency at public and state-owned companies.
The changes, signed into law in 2024, introduce binding shareholder oversight of remuneration policies.
Under the new framework, public and state-owned companies will be required to secure shareholder approval for their executive remuneration policies through a binding vote at annual general meetings. The policies must also be reviewed at least once every three years, or sooner if materially revised.
According to law firm Bowmans, companies are also required to publish detailed annual remuneration reports, including the pay of individual directors and prescribed officers, as well as information on average and median employee pay and the gap between the highest and lowest earners.
"Changes to the policy may not be implemented until approved by shareholders. Where a vote on the policy fails, the prior remuneration policy will apply until such time as shareholder approval has been obtained," Bowmans said.
"These companies must also prepare an annual remuneration report, comprising a background statement, the remuneration policy, and an implementation report."
Bowmans also said the implementation report will be subject to a “two-strike rule”, where repeated rejection at two consecutive annual general meetings may result in non-executive directors on remuneration committees being barred from serving on those committees for two years.
"For JSE-listed companies who are annually publishing a remuneration policy and the implementation report already in accordance with the Listing Requirements, the key change (in addition to the disclosures highlighted above) is that the vote will now be binding, rather than a non-binding advisory vote.'
"Public companies should be prioritising efforts to align their policies and reports with the new statutory regime, and to conduct comprehensive pay-gap analyses ahead of reporting thereon".
Trade union COSATU has welcomed the implementation of key provisions in the amended Companies Act, saying the changes will improve transparency around executive pay and wage gaps.
COSATU said the new rules will help workers and shareholders better understand pay structures in companies and strengthen accountability at annual general meetings.
"This will allow workers, shareholders and the public to compare companies’ wage gaps and help shareholders determine whether executive pay is morally acceptable and strengthen shareholders’ ability to reject executive remuneration where it is excessive and unjustifiable".
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