Play Your Part: Help Change “Vote on Pay” Rules

Published - 4 March, 2020

Pressures to contribute and campaign for better economic parity have begun to reach the asset management industry in South Africa. The industry is being urged to become more proactive by doing more to interrogate executive remuneration by voting and encouraging better governance on this matter.

Shareholder activists and corporates alike have suggested that the vote by shareholders on executive pay should be binding, to help accelerate the narrowing of the income gap in the country and therefore reducing inequality.

As it stands, the shareholders’ vote on pay in South Africa is non-binding. Votes by shareholders on company pay policies are not material. These votes are advisory, and companies are not legally obligated to review the policies. To mitigate the total disregard of shareholders, the JSE’s Listing Requirements compel companies to engage shareholders if more than 25% voted against their pay policies.

Tackling Inequality

South African executives are among the highest-paid in the world and as a result, the hefty executive salaries have been a contentious issue for years in South Africa. According to the World Bank, South Africa’s Gini coefficient – a measure of income and wealth inequality – stood at a coefficient of 0.63 in 2015, increasing from 0.61 in 1996. The closer the Gini index is to 1, the higher the inequality in the country.

Fund and asset managers that take their roles as custodians seriously are actively engaging with issuers and tracking the progress of these engagements over time as a measure of their effectiveness. They are helping to shape how companies tackle inequality in the country by advocating through remuneration policies. Just as asset managers challenge the companies they invest in on the financial performance, they should also play a role in fixing the broader marketplace.

Although there have been sporadic efforts by some asset managers to challenge the hefty executive remuneration in listed companies lately, investors must go a step further by asking executives to explain how their remuneration measures against that of other employees in their companies. It is being suggested that institutional investors demand a binding shareholder vote on executive pay.

Enter iCA

The Corporate Actions Automation platform (iCA) was conceived by Ince, and partner Marble Tech, to address the South African market’s need for a solution to address the automated processing of high volumes of elective events and proxy voting.

The iCA for Managers (iCA4M) platform gives fund managers the ability to increase transparency. iCA4M is an alternative to admin-heavy, costly and non-revenue generating activities designed for fund managers. It provides proxy voting functionality to fund managers for electronic voting and supports the feeding of data from upstream systems such as ASISA: The Association for Savings and Investments South Africa, while integrating results back into line-of-business systems.

iCA for Stockbrokers (iCA4B) is the online corporate action and proxy voting system, which gives users the ability to leverage a cloud-based platform that allows for simple and seamless participation by shareholders in relevant corporate action events in a way that can be audited, tracked and reported on, to minimise manual intense administrative tasks which are costly and risk-sensitive.

Brokers that are using iCA4B have seen average rates of voting and election of between 30% and 40% and enjoy guaranteed on-time consolidated summary reports delivery to the Central Securities Depository Participants on event due dates.

The iCA platforms automate traditionally labour-intensive processes and empower shareholders by providing a seamless online voting experience.

Contact us to get more information on iCA or to request a demo.