CAPITALISM MEANS HUGE PAY FOR THE CEOs AND LESS PAY FOR THE WORKERS.

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Capitalism disregards many ethical issues in pursuit of supply and demand. Many jobs have left the countries to help increase profit margins by hiring lower paid workers abroad. While this does work in the short term it hurts the domestic economies in the long run. Less working class people mean less demand.

As well, this model has depreciated the value of the environment by constantly trying to cut costs to keep up with inflation. This impacts our health which lays down yet another cost. And lastly since most people can’t afford to buy quality merchandise most prefer to make their money stretch by spending at places like Wal-Mart. Most of these products are cheap and break quickly adding more waste to the environment.

It is a system of largely private ownership that is open to new ideas, new firms and new owners—in short, to new capital. Capitalism’s rationale to proponents and critics alike has long been recognized to be its dynamism, that is, its innovations and, more subtly, its selectiveness in the innovations it tries out. At the same time, capitalism is also known for its tendency to generate instability, often associated with the existence of financial crises, job insecurity and failures to include the disadvantaged.

Capitalism is an economic system where things used to make other things are owned by people or an individual, not by a government or communities. People have to barter or work for money so they can buy things they need or want, such as food. But in capitalist states, the results are inequality and social conflicts. Therefore, according to the functionalist perspective, social inequality is inevitable and functional for society. Another sociological perspective is that of conflict theory. The ideas for this theory originate in the work of German-born Karl Marx, who saw society as marked by class conflict.

For centuries, sociologists have analyzed social stratification, its root causes, and its effects on society. Theorists Karl Marx and Max Weber disagreed about the nature of class, in particular. Other sociologists applied traditional frameworks to stratification. Karl Marx based his conflict theory on the idea that modern society has only two classes of people: the bourgeoisie and the proletariat. The bourgeoisie are the owners of the means of production: the factories, businesses, and equipment needed to produce wealth. The proletariat are the workers.

According to Marx, the bourgeoisie in capitalist societies exploit workers. The owners pay them enough to afford food and a place to live, and the workers, who do not realize they are being exploited, have a false consciousness, or a mistaken sense, that they are well off. They think they can count on their capitalist bosses to do what was best for them.

Now let us look at the life of the bourgeoisie; a CEO of a company and how they relate to the average worker. How they earn and how the average company pays the CEO.

In South Africa, the CEOs of large JSE-listed companies often make headlines for having some of the highest salaries in the country – comparable even to many international executives. And a brief assessment of ‘small cap’ companies shows that many CEOs in this category also draw significant wages while the workers have to share a small portion of the pie.

There is no strict definition for a “small cap” company – those companies with a small market capitalisation – but many investors and funds peg them to have a value of around R3 billion. By comparison, South Africa’s most valuable company, Naspers, boasts a current market cap that borders R1 trillion.

Research published earlier in the year found that the average salary for a CEO of listed company in South Africa was R5.3 million – shooting up to R9 million when bonuses and incentives are included. But an average wage of a worker in the industries; mining, agriculture and manufacturing, are between R3000 to R5500 a month; R36000 to R66000 annually.

When looking at the larger companies on the JSE, in terms of market cap, it’s unsurprising that chief executives of these highly profitable groups take home a much larger salary than those running smaller operations.

BusinessTech looks at the wage gap between the top 10 most prominent large cap companies on the JSE, versus 10 prominent small cap companies.

Large cap companies

Company Market Cap CEO salary annually
Naspers R965 billion R21 million
Richemont R471 billion R150 million
Steinhoff R346 billion R74.6 million
Sasol R272 billion R15.9 million
MTN R267 billion R40.6 million
FirstRand R250 billion R29.5 million
Vodacom R247 billion R10.9 million
Standard Bank R195 billion R24.3 million
Anglo American R194 billion R73.9 million
Old Mutual R189 billion R104 million
Average R340 billion R54.5 million

Compagnie Financière Richemont SA recently made waves by rewarding its two co-CEOs with a combined package of R300 million in the past financial year (roughly R150 million each). On top of this, chairman, Johann Rupert, walked away with R50 million.

This massive payout (which was in Swiss Francs) skews the top tier data, drawing the average up to approximately R54.5 million for large cap companies.

It is also noticeable which executives get paid in foreign currency, as their salaries are overall significantly larger than those who earn in rands, thanks to the weak exchange rate.

But even small-cap companies can venture north of the average. The 10 prominent small cap groups sampled below show the average CEO earns R6.2 million, compared to R54.5 million average paid to CEOs of some of the biggest companies in South Africa.

Small cap companies

Company Market Cap CEO salary
Consolidated Infrastructure R4.3 billion R10.3 million
Spur Corporation R3.5 billion R5.6 million
Tower Property Fund R2.5 billion R1.6 million
Adcorp R1.8 billion R18.2 million
Grand Parade R1.8 billion R8.6 million
Adapt IT R1.7 billion R3.3 million
ARB Holdings R1.3 billion R3.6 million
Bowler Metcalf R893 million R2.6 million
Taste Holdings R825 million R5.2 million
Ellies R310 million R2.9 million
Average R1.9 billion R6.2 million

A report by Moneyweb in February looked at the basic and total salaries of over 730 executive directors from 329 listed companies on the JSE.

All data was sourced from annual reports and Statistics SA’s Quarterly Employment Survey for the second quarter of 2015.

It found the following:

  • The average executive in South Africa earns a basic salary of R4 million, jumping to R7 million with short and long-term incentives included.
  • Chief executives earn an average basic salary of R5.3 million, jumping to R9 million with incentives included.

Unsurprisingly, executive directors who earn in local currency were paid less, overall, with an average of R3.4 million (R5.7 million including incentives), versus those earning in other currencies, which averaged a basic salary of R7.8 million (R16 million with incentives).

Financial services company, PwC, found that the median total guaranteed pay (TGP) among CEOs on the JSE in 2014 was R4.13 million.

Chief Executive Officers

CEO – All of JSE 2013 2014 %
Upper Quartile  R6.624m R7.135m 7.7%
Median R3.943m R4.130m 4.8%
Lower Quartile  R3.002m R3.064m 2.1%

 

The modern world is ruled by multinational corporations and governed by a capitalistic ideology that believes: Corporations are a special breed of people, motivated solely by self-interest. Corporations seek to maximize return on capital by leveraging productivity and paying the least possible amount for taxes and labor. Corporate executives pledge allegiance to their directors and shareholders. The dominant corporate perspective is short term, the current financial quarter, and the dominant corporate ethic is greed, doing whatever it takes to maximize profit.

In general, looking at the above injustices, it is simple to see that capitalism is a system of exploitation. The work of the workers is stolen by those who do nothing. To continue as a world, we need to move on. Capitalism does not even work the way it originally was supposed to. The “free market” does not exist anymore, gigantic corporations with immense power dominate the market. Society cannot survive any longer with capitalism. “Each according to his abilities, each according to his needs”

 

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