Tax issues take back seat on SA boards

AROUND the world, large, listed companies are troubled by cyber-security risks and company taxes, yet these concerns remain fairly low on the priority list of boards of directors.

According to a PwC report on nonexecutive directors’ practices and remuneration trends, 60% of directors said their board had not discussed public perceptions regarding their company’s effective tax rate or use of tax havens.

However, the issue of company taxes is high on the agenda of governments globally, with the Organisation for Economic Co-operation and Development (OECD) publishing a 15-point action plan to ensure that companies pay their fair share of tax within the jurisdictions in which they operate.

In SA, the Davis Tax Committee published its recommendations on measures to curb tax-base erosion and profit shifting last month.

According to the PwC report, about two-thirds of the nonexecutive directors have not discussed public perceptions of their company’s repatriation of offshore profits.

Deloitte tax head Nazrien Kader said tax issues might have temporarily fallen off board agendas because of the economic challenges companies were facing.

However, it remained one of the most significant risk management issues for large multinationals.

She said companies were acutely aware of their legal obligations to pay the taxes that were due, and of their moral obligations to pay their fair share. “The tax debate would continue to rage in boardrooms.”

The PwC report showed that despite cyber-security breaches being at an “all-time high”, 67% of the directors said their boards had not discussed the company’s cybersecurity insurance coverage.

PwC head of human resource services Gerald Seegers said last week that institutional investors had placed environmental, social and corporate governance issues high on the investment agenda, and many would seriously consider disinvestment if these issues were not firmly entrenched in company strategy.

In SA, he said the Public Investment Corporation was the biggest institutional investor and had been vocal about remuneration practices. It was becoming more vocal on environmental, social issues and corporate governance.

Executive salaries remained top of the priority list for boards. In SA, the average remuneration for a board chairperson last year was R449,000, up 6.5% from 2013, and the average fee for nonexecutive directors was R304,000, up 5.6%.

The average fee for nonexecutive directors of state-owned enterprises (SOEs) was R348,000. However, the average fee for a chairperson of an SOE was R828,000.

Mr Seegers said SOE chairmen’s fees were lower than those of large-cap companies in sectors such as financial services or resources. The average remuneration for the chairperson of a large-cap resources company was R1.82m.