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Q1 2022 - (released May 2022)

SA's quarterly Private Equity & Venture Capital magazine

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The Blue Collar Board Member

by Langa Madonko

Recently, the CEO of a JSE listed company (in the most unequal country in the world) was awarded an annual payment of R300m for his stellar performance of steering the ship through the choppiest waters in a while, as spurred by the advent of the COVID pandemic.

The conversations immediately gravitated to the topic of the earnings gap between the C-Suite and the blue collar worker. It also brought in the issue of how votes on remuneration at shareholder level are materially insignificant in determining the outcomes of the remuneration, and that it would be a long time before this gap narrowed, at least in the SA context.

Although the inequality conversation dominates the South African context, perhaps a more nuanced conversation is the one of how inequality is not only the measure of the discrepancy between races or gender, but that, even in an environment of equal opportunity such as the workplace, a CEO can earn R300m while cleaning staff and other workers earn less than R10,000. 

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A colleague of mine brought to my attention the conversation on the amendments to the Companies Act, which propose the representation of workers on the boards of companies. Being a private investor, one always looks at legislation through the lens of what the proposed legislation is trying to curb or promote. That being said, in my view the proposal looks to address some of the issues linked to inequality by allowing the employees to participate in the governance and decision-making processes affecting the future of the company. South Africa is not the first to move in this direction.  In fact,  some State Owned and Private Companies have set up two tiered structures that have acted as sounding boards on governance and operations.

So why is the legislation coming now? It is my view that there are primarily two reasons why the Department of Trade and Industry would want to move in this direction. The first is B-BBEE. With the allowance of Employee Share Schemes in South Africa, one of the gripes of the B-BBEE Commissioner has been how the legislation specifically anchors B-BBEE on 3 pillars, one of which is voting rights, the structure of which is not as envisaged by the Commissioner. Secondly, the issue of continuous strikes – in a past briefing, the current Minister of Trade and Industry postulated that if workers had a seat at the table, they would better understand the nuances of business, and the conversations would be a lot smoother. 

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Personally, I am in favour of this regulation for the following reasons, and offer them as justification for this welcome change, while acknowledging that there may be limitations in terms of some of the practicalities of implementation.


Firstly, statistics have shown that diverse boards of companies tend to perform better. In theory, bringing workers in who are from diverse backgrounds and experiences, and who understand a different aspect of the business, would, in my opinion, likely bring varied schools of thought to conversations. This would allow companies to gain an improved awareness of their target audiences, especially for those businesses that look to serve the Historically Disadvantaged and female markets, where a simple check of the annual reports of the JSE listed and CIPC registered companies shows their glaring under representation.

Secondly, I believe that the amendments would be positive in terms of the alignment of the interests of company boards with the companies’ best interests. The employees who work in the business would have a different view of the path that the business should chart, hopefully taking a balanced risk approach, in contrast to some board members who have a profit motive and sometimes forget to take their foot off the gas, even if they see a blind rise, in pursuit of the returns. I believe that such a balanced board would come closer to choosing a socially responsible approach towards investing and growing the business; an approach that will balance the profit imperative with the social imperative, as well as the need to preserve and create jobs as part of achieving sustainability.

Thirdly, there is the aspect of the collective social mistrust that exists in South Africa. It’s always clear that business and labour don’t trust government, and labour does not like business, or government outside of an election year. The offer of a seat at the table on terms that give sufficient power and influence and a substantial level of transparency to employees of the business may be a start.

Glaring considerations exist, such as how employee directors are chosen and by whom; management or by an independent external process? What proportion of boards will be employee representatives, and will the balance of power make them ineffectual? Could this become another fulfilment of the South African proverb of great concepts, poor execution, as has taunted other legislation? Whatever the outcome, I believe that through this muted change, South Africa has an opportunity to introspect and to decide how it wants to deal with the unequal workplace by investigating what this law is trying to achieve. 

Madonko is an Investment Principal | Investor Relations & Capital Raising at Summit Africa.

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