MTN recently revealed that its former CEO, Rob Shuter received a pay package of R74 million for eight months’ work.
Other MTN executives also did well. New CEO Ralph Mupita was paid R31 million while MTN SA CEO Godfrey Motsa received R17 million.
In a country where the average salary in the formal sector is around R22,000 per month, these executive pay packages elicited a big response.
Thousands of South Africans viewed this as corporate greed and called for executive pay caps to fight income inequality.
After all, how do you justify paying executives millions when lower-level workers are losing their jobs during the pandemic?
The reality is that these salaries are in line with international standards and unless it stays that way, the country will face an exodus of top executives.
South Africa has world-class IT and telecoms executives who are in global demand. Shuter, for example, was head-hunted by BT Group and is now the CEO of its enterprise division in the UK.
The need to pay people well to keep them in a company – and South Africa – is, however, only part of the story.
Big salaries are an economic reality that fuel economic growth – and they should not be tampered with.
The arguments against high executive pay and income inequality are often moral arguments that confuse merit with productivity.
Pay is linked to productivity. A top executive can add great value to a company and create tremendous wealth. This is rewarded with big pay cheques.
Take Elon Musk, for example. He is the driving force behind Tesla which brought the world innovative products and created enormous shareholder value.
In return for this exceptional performance, Musk received large bonuses which, in combination with his Tesla shareholding, made him the richest person in the world.
Compare that with the person sweeping the Tesla factory floor. He does not get paid much and may even need a second job to make ends meet.
To put the pay gap into perspective, in 2021 Elon Musk earned more per hour – $20 million – than what the factory worker will earn in his lifetime.
This does not seem fair. In fact, it is enough for people to declare capitalism a failed system and reach for Karl Marx’s The Communist Manifesto.
The inconvenient truth is that Elon Musk has the ability to be more productive in an hour than what most people will be able to achieve in a lifetime.
This does not mean less productive jobs do not have merit. In fact, quite the inverse.
There is tremendous merit in the work done by teachers, doctors, nurses, cleaners, road builders, and cooks. They should be applauded for making society a better place.
These professions, however, do not scale well which means their productivity, and therefore their salaries are capped.
A CEO of a large company, in comparison, can create or destroy vast amounts of wealth through a single decision.
You have to look no further than South Africa’s state-owned enterprises like Eskom, the SAA, and the SABC to see the impact of poor leaders. They can destroy a company, and even a country.
A good leader, in contrast, can rapidly create wealth and employment and improve the lives of millions of people.
As long as executive compensation is linked to the performance of the company and the value they add, high salaries should be celebrated.
This is already happening with sports stars and entertainers.
Tiger Woods, Roger Federer, Rafael Nadal, and Serena Williams are idolised for their skills and can make more in a single tournament win than what many other players earn in a lifetime.
The best actors, like Tom Cruise or Charlize Theron, pack cinemas and earn millions for a single movie.
The top business leaders have equally scarce and impressive skills and should receive the same respect as their counterparts in sport, music, or movies.
This may even help young people to pick business leaders as role models instead of the politicians who vilify them to the detriment of the economy.
There is, however, a caveat. Poor performance should not be tolerated.
Just like a sportsman who is dropped from a team if they are out of form, a CEO who is not showing results should be shown the door.
This raises the question of who the best-paid tech CEOs in South Africa are, and how they performed during their tenure as chief executives.
Rob Shuter tops the list with his R74-million pay package, followed by Vodacom CEO Shameel Joosub on R43 million and Telkom CEO Sipho Maseko on R22 million.
The image below shows the salary packages of prominent South African telecoms and IT CEOs, with the average annual market cap growth during their time as CEO.
It should be noted that Van Coller took the reins at a challenging time at EOH, and his performance should realistically only be judged in a few years.
This is an opinion piece.