Senior executives can have their cake and eat it

For those who happen to own their own residence, the news that property prices have gone up by about 35 percent in the year to August is wonderful. Or is it?

You might be inclined to feel 35 percent richer but the extra wealth would only be realised if you sold the property and didn't want to buy another property.

If you plan to buy another house then you're obviously looking at an additional 35 percent outlay.

So although you might feel very pleased with yourself for being so clever and having had the foresight to buy property that was now 35 percent more valuable, on balance you're no better off than you were a year ago.

The very good news of course is that you're no worse off, which might or might not help to make up for the fact that those individuals who do not own their own residences are now 35 percent further away from being able to do so.

And as for feeling very clever about your purchase decision, the fact is that you are better off now largely because of Tito Mboweni's monetary policy, as well as the country's rigorous macro-economic policies.

But if you happened to be a senior executive of a retail company or a bank, things would be completely different. The value of your company's sales might be up by about 35 percent and you might be inclined to feel that the value of your company was up by 35 percent, which could be the case if it was listed.

But unlike your common or garden house owner, as a senior executive you can now not only sit with this increased sense of wealth but you can simultaneously realise a large chunk of the increased value by effortlessly extricating an additional huge whack of executive remuneration from the company.

You can in fact have your cake and eat it, all with the blessing of the free market. And nobody will care that you are being rewarded for what is largely the outcome of monetary and macro-economic policies that have as much to do with you as they do for the average house owner. AC

Article from: www.busrep.co.za