Companies Amendment Act will be counter-productive and harmful


Sakeliga criticised certain aspects the proposed Companies Amendment Act (“the Act”) in its comments to the portfolio committee on Trade, Industry and Competition.

This Act which was ostensibly tabled with the aim of achieving “equity between directors and senior management on the one hand, and shareholders and workers on the other hand” as well as “addressing public concerns about high levels of inequalities in society” rather threatens to cause substantial social and economic damage – without any corresponding benefit being brought about.

The provision that the names of directors or other prescribed officers who receive compensation from a designated company must be published and made known serves no legitimate purpose and will instead foster unhappiness and discord in companies.

Furthermore, there is no logical or legal connection between the mandatory disclosure of the so-called compensation gap between various levels of staff within an organization and any meaningful objectives of the state.

The employee compensation gap is not a random occurrence. Rather, it is the product of a constant process of negotiation and trade-offs. For example, the employer looks at the potential value-add of an employee to the company, while the employee looks at better paying job opportunities that can be pursued elsewhere.

A centralised and coercive effort to artificially manipulate compensation decisions of companies will only lead to resignations, layoffs, and unproductive behaviour. It will also distort tailor-made incentive structures that drive employee performance in particular circumstances.

Although improved transparency is not harmful per se, significant harm can be caused by forcing companies to adopt detailed compensation policies and reports, which may well end up in the hands of all or most employees and the public.

Sakeliga believes that given the negative impact – particularly of articles 5 and 6 of the Act, as well as its apparent unconstitutionality, the Act should not be allowed to proceed with the inclusion of these provisions.


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