Company boards in South Africa are facing tougher scrutiny over what they pay their top executives, after long-awaited remuneration provisions of the Companies Amendment Act came into force this year.
Signed into law by President Cyril Ramaphosa in 2024, sections 30A and 30B introduce a "two-strike" rule aimed at directors who sit on remuneration committees at listed and state-owned companies. The provisions also push firms to spell out how the pay of their highest earners compares with that of their lowest-paid staff.
How the two strikes work
Under section 30B(2), companies must now put an annual remuneration report to shareholders for approval by ordinary resolution at the AGM. If that report is voted down, the remuneration committee must address shareholders' concerns and report back the following year — that is strike one. Should the report fail again at the next AGM, the non-executive members of the committee may keep their board seats only if they are re-elected, but they become ineligible to serve on the remuneration committee for two years. That is strike two.
Advisers at law firm Cliffe Dekker Hofmeyr warn the mechanics could prove awkward in practice. Because a company will not always know in advance whether affected directors must stand down, they suggest boards may need to include "conditional" re-election resolutions in their AGM notices that fall away if the pay vote passes.
Relief from the JSE
There is some good news for listed companies. The JSE previously required a non-binding advisory vote on remuneration, with shareholder engagement triggered if 25% or more voted against. The new Act instead demands a binding vote that fails only if more than 50% of shareholders object. The exchange has confirmed that complying with the Act satisfies its own rules, so the old non-binding vote falls away — effectively lifting the dissent threshold from 25% to 50%.
Foreign issuers are the exception: because the Companies Act does not apply to them, they must still hold the non-binding advisory vote under the JSE's listing requirements. For everyone else, shareholder votes on executive pay now carry real teeth.
