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The latest trends in executive pay in Africa show a growing alignment with practices in developed markets, although there are still gaps to fill, especially in remuneration disclosure and reporting.
This is according to research recently undertaken by pre-eminent African law firm, Bowmans, which reveals some striking developments in executive remuneration at listed companies across six key jurisdictions – Kenya, Mauritius, Nigeria, South Africa, Tanzania and Zambia.
Among them are the increasing adoption of executive share plans (ESPs) and employee stock ownership plans (ESOPs), along with the use of innovative structures such as the single incentive, which combines short-term and long-term incentives (STIs and LTIs).
Notably, there is a growing trend among employers to apply malus and clawback provisions to incentive awards. These provisions apply when trigger events such as material misstatement of financial statements and misconduct occur.
'Along with minimum shareholding requirements, these provisions are now very common in developed markets and are starting to gain traction in African markets,' says Norma Mazibuko, executive rewards consultant at Bowmans' Johannesburg office. 'They are not 'executive friendly' provisions but are favoured by shareholders to protect and align management with their interests.'
Also gaining momentum is the integration of environmental, social and governance (ESG) performance conditions into executives' reward packages.
Mazibuko says African listed companies will need to incorporate ESG performance measures into their future remuneration frameworks, especially LTIs, if they wish to attract global shareholders and sophisticated African shareholders. 'But this will need to be accomplished in a balanced way that provides sufficient comfort to global investors while not discouraging great leaders and key talent from senior roles at African companies,' she says.
Greater remuneration disclosure gives investors comfort
One area of executive remuneration where approaches differ markedly is in disclosure and reporting. While all six countries included in the Bowmans study have legislation to encourage good remuneration governance, there are varying levels of disclosure of public companies' remuneration policies and data.
'The research shows that public companies in Kenya and South Africa provide the most detailed remuneration reports, and this may well be a function of stricter regulatory requirements and enforcement,' Mazibuko says.
On the other hand, companies in Mauritius, Nigeria, Tanzania and Zambia tend to only disclose guaranteed packages.
'There is an opportunity for further disclosure in the countries with limited disclosure. This in turn would enhance the overall standard of disclosure across the African continent,' she says.
'Enhanced remuneration governance and reporting will increase the comfort of global investors in the quality and integrity of a company's overall governance and sustainability.'
Another growing African trend that aligns with global practice is the emphasis on the non-financial aspects of the total reward environment, such as flexible working arrangements and executive wellness programmes for work-life balance.
