The levels of executive remuneration in the mining sector are always contentious due to labour tension in the sector and the perceived inequality that exists between the highest and lowest paid employees.
A Moneyweb analysis shows that, although there are a few outliers where CEOs earn in excess of 100 times the salary of the rank and file employees in their companies, the overwhelming majority of company leaders in the mining sector earn less than a widely accepted ratio of 50 times.
The research, conducted by Moneyweb and Profile Media, is based on the manual analysis of the annual remuneration packages of 966 executive directors of 329 listed companies, as published in the companies’ latest annual reports. The research excludes long-term incentives such as share schemes. These packages were then compared with the average salaries of employees in the respective economic sectors where the companies are plying their trade (data from Statistics South Africa) to calculate the pay gap ratio. Read here for the full methodology of the research.
This research was prompted by the new US Securities and Exchange Commission’s (SEC’s) introduction of a new pay gap ratio rule, which will force US companies from 2017 to disclose the ratio between the salaries of their executive directors and their rank and file employees.
Executive remuneration will always be a contentious issue, especially in the mining industry. The industry is also under a lot of pressure from low international commodity prices, with many mines currently suffering losses.
From the research it is clear that the pay gap ratio in the broad mining sector is similar to the average ratio of all JSE-listed companies. It is also evident that the massive salaries of international mining giants Anglo American CEO Mark Cutifani (R66 926 332) and BHP Billiton CEO Andrew Mackenzie (R56 902 390) have a significant impact on the average salaries in the mining sector.
Both Cutifani and Mackenzie run massive mining companies on various continents and it may be unfair to compare their salaries with the average salaries in the South African mining industry. If the salaries of Cutifani and Mackenzie are not taken into account in the local non-gold mining sector, the average remuneration packages in these industries are significantly lower than the average JSE CEO package.
The pay gap ratios below are based on average annual salaries of R192 000 in the gold sector and R209 000 in the non-gold sector as found by StatsSA.
The tables below represent statistics for CEO remuneration.
|Sector||Guaranteed package||Short-term incentive||Total annual salary||Ratio ex bonus||Ratio cum bonus|
|Average of all mining companies||R7 458 360||R4 839 608||R11 170 572||37||55|
|Gold mining||R7 023 513||R3 084 288||R10 107 800||37||53|
|Non-gold mining||R7 613 526||R5 487 942||R12 222 924||38||58|
|Non-gold mining excluding BHP Billiton and Anglo American||R5 463 904||R3 200 029||R7 705 520||26||37|
|Average salary of CEOs of JSE companies||R6 305 238||R2 854 168||R9 159 406||35||49|
Nic Holland, CEO of Goldfields, is the highest paid South African-based mining CEO and received a total annual package of R28.17 million in the company’s 2014 financial year. This included a basic package of R10.7 million and a bonus of R11.5 million. The pay gap ratio in Goldfields for Holland’s full package was 147 times, or 87 if his bonus is excluded.
The only other South African-based company where the pay gap ratio exceeds 100 times is Assore. Christopher Cory‘s R21.6 million package resulted in a pay gap ratio of 103 times.
The lowest paid CEO in the gold mining sector was Niel Pretorius of DRD Gold. He received a basic package of R5.5 million and he did not accept a bonus. DRD Gold’s pay gap ratio is 29.
The analysis of the annual reports also shows that several CEOs in the mining sector do not receive a salary. This list includes many smaller companies such as Atlas, Delrand, and Keaton.
|Gold companies||Name||Total Annual Based Reward||Share performance for period||HEPS performance||Ratio ex bonus||Ratio cum bonus|
|Gold Fields Ltd.||Nic Holland||R28 169 400||59%||-145,17%||87||147|
|AngloGold Ashanti Ltd.||Srinivasan Venkatakrishnan||R16 119 000||-17%||-206,95%||84||84|
|Sibanye Gold Ltd.||Neal Froneman||R12 868 000||83%||-52,11%||40||67|
|Harmony Gold Mining Company Ltd.||Graham Briggs||R10 141 000||-50%||-826,92%||42||53|
|Randgold & Exploration Co Ltd.||Marais Steyn||R8 021 000||12%||2287,50%||11||42|
|DRDGOLD Ltd.||Niel Pretorius||R5 544 000||-23%||-183,33%||29||29|
|Pamodzi Gold Ltd.||Ndaba Ntsele||R0||-32%||669,47%||0||0|
|Goliath Gold Mining Ltd.||D B Richards||R0||-16%||62,50%||0||0|
|R10 107 800||37||53|
|Non-gold companies||Surname||Total annual salary||Share performance for period||HEPS performance||Ratio ex bonus||Ratio cum bonus|
|Anglo American plc||Mark Cutifani||R66 926 332||-6%||32%||186||319|
|BHP Billiton||Andrew Mackenzie||R56 902 390||34%||8%||159||272|
|Assore||Christopher Cory||R21 570 000||-71%||-53%||30||103|
|Anglo American Platinum||Christopher Griffith||R18 492 936||-13%||-46%||46||88|
|Exxaro Resources||Sipho Nkosi||R16 847 296||-29%||-7%||65||80|
|African Rainbow Minerals||Patrice Motsepe||R10 769 000||-56%||-58%||39||51|
|African Rainbow Minerals||Mike Schmidt||R10 343 000||-56%||-58%||31||49|
|Northam Platinum||Paul Dunne||R8 647 000||-12%||-9323%||31||41|
|Merafe Resources||Zanele Matlala||R8 163 000||15%||-22%||26||39|
|Trans Hex||Llewellyn Delport||R8 146 000||-20%||-451%||29||39|
|Royal Bafokeng Platinum||Stephen Phiri||R7 648 104||-11%||38%||20||37|
|Impala Platinum Holdings||Terence Goodlace||R7 484 000||-49%||-58%||36||36|
|Atlatsa Resources Corporation||A Harold C Motaung||R6 680 080||-60%||-60%||32||32|
|Petmin||Jan Du Preez||R6 546 000||-38%||62%||19||31|
|Lonmin plc||Ben Magara||R6 373 212||-35%||-217%||30||30|
|Coal of Africa||David Brown||R6 059 063||19%||-92%||29||29|
|Wesizwe Platinum||Jianke Gao||R5 277 273||4%||0%||25||25|
|Assore||Desmond Sacco||R4 985 000||-71%||-53%||22||24|
|Keaton Energy Holdings||Amanda Glad||R4 377 856||-21%||-99%||15||21|
|Buildmax||Terry Bantock||R4 225 000||-71%||-286%||16||20|
|Platfields||Derrick B Mbindwane||R1 989 919||-60%||-57%||9||9|
|Pan African Resources PLC||Cobus Loots||R1 972 711||-32%||-53%||9||9|
|Bauba Platinum||Sydney J M Caddy||R1 935 000||-18%||-160%||9||9|
|Sable Metals and Minerals||James Allan||R990 000||-79%||3%||5||5|
|R12 222 924||38||58|
Source: Profile Media and Moneyweb