Use of non-financial key performance indicators (KPIs) in executive remuneration incentive structures has increased fairly steeply in the past three years, but remains problematic.

August 2025

Most companies we cover (80 JSE-listed companies accounting for 90% of the JSE by market cap) now incorporate non-financial KPIs in executive incentive structures. But the level of disclosure on required performance and how it is measured is often very poor and can undermine the integrity of the remuneration policy. Common issues include:

• Insufficient information - non-financial KPIs are frequently not explained/described, so it is difficult to determine how they are implemented and how performance is measured.
• KPIs based on a company’s score against a commercial rating system or financial market index - disclosure very seldom reveals how scores are driven up or down, so stakeholders cannot identify ESG focus areas.
• Compliance-based KPIs - ‘BEE scorecard’ is a KPI in some executive incentive structures. This is a compliance requirement and we do not believe management should be rewarded for complying with legislation.
• Standard job functions as KPIs - we frequently criticise KPIs such as ‘leadership’ and ‘effective management’ as we believe these are inherent in an executive’s role and should not be treated as rewardable performance.

Our stance

Shareholders are entitled to clarity on how company executives are incentivised as this may affect their investment decision. The following disclosure should be provided every year, for every KPI:
1 weighting
2 required performance
3 how performance is measured
4 performance target

Anything less is unacceptable, in our view, as it weakens shareholders’ ability to evaluate incentive structures, assess executive performance and hold executives accountable.