Amendments to South Africa's Companies Act, effective May 22, 2026, mandate that public and state-owned companies subject their remuneration policies and annual remuneration reports to binding shareholder votes. Previously, these votes were advisory, but the new regime requires approval by ordinary resolution (more than 50% of votes cast) and introduces real consequences for remuneration committees if reports fail to pass.
Under the new rules, if a remuneration report is not approved, the remuneration committee members who are not involved in day-to-day management must stand for re-election at the next AGM. A second consecutive failure bars those members from serving on the remuneration committee for two years. This shift significantly elevates shareholder power, moving accountability for remuneration decisions directly from the board to individual committee members. Early results from AGMs at companies like Absa and Old Mutual, even under the old non-binding regime but reflecting new sentiment, showed notable dissent levels, with 43% of Absa shareholders voting against the implementation report and 32% at Old Mutual against the policy, suggesting investors are not softening their stance.
The amendments also introduce new disclosure requirements, including the total remuneration of each director and prescribed officer, the highest and lowest-paid employees, and the average and median employee remuneration, alongside a wage gap ratio between the top 5% and bottom 5% earners. This enhanced transparency, coupled with the binding vote, pushes companies to engage proactively with shareholders on remuneration issues, stress-test their reports against proxy advisor questions, and address potential dissent before it leads to failed resolutions. Companies that experience dissent between 25% and 50% are in a "governance no-man's land," with too much dissent to ignore but not enough to trigger statutory mechanisms, necessitating voluntary engagement to prevent future failures.
The JSE previously required mandatory engagement for 25% dissent under the non-binding advisory regime. However, the new binding regime raises this threshold to over 50% for formal consequences. Despite this higher threshold, the early evidence suggests South African institutional investors are willing to leverage their increased power. Remuneration committees are now advised to engage major shareholders on policy before tabling it and be prepared for substantial dissent, even if resolutions technically pass, as a warning shot for future votes.
