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Sep 14, 2012

New State company remuneration framework to stress delivery against compacts

Johannesburg|Africa|Public Enterprises|Africa|South Africa|Service|Malusi Gigaba|Tshediso Matona|Southern Africa
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South Africa’s Department of Public Enterprises (DPE) says its review of State-owned company (SoC) executive remuneration is well advanced and that the model that is eventually adopted will seek to strengthen the link between performance, as defined by shareholder compacts, and remuneration.

Addressing delegates to a Chartered Secretaries Southern Africa conference in Johannesburg on Friday, director-general Tshediso Matona said the department was “grappling” with ways to balance the need to attract top-level talent with society’s current anxiety over salaries that, in some cases, were perceived to be excessive.

Prevailing remuneration methodologies being used by the eight SoCs for which the DPE had direct shareholder oversight had been driven by the entities themselves, which had placed the DPE in a “reactive position” on the matter.

Public Enterprises Minister Malusi Gigaba instituted a review of the framework and indicated in August that he was likely to consider the outcomes in September, before handing the report to Cabinet for its consideration.

A challenge, Matona indicated, was how to respond in instances where remuneration levels had already breached certain thresholds.

“[In those circumstances], what do you do? Do you undertake a massive across-the-board reduction of remuneration levels, which are bound in contractual relationships? Or, do you temper the rate at which these remuneration levels are rising? I think the answer lies between those two extremes,” Matona said.

In future bonuses needed to be justified by “demonstrable achievements” of the company and its executives against the shareholder compact.

There was also a need to de-emphasise the monetary rewards associated with serving on a SoC board, or as an executive and to re-emphasise the public-service dimension.

“I am optimistic, because where we have, for example, had a moratorium, for two years, with regard to the remuneration of directors, I haven’t seen a massive exodus,” Matona said, adding that there were many committed South Africans who want to use their time to engage in public service.

The new framework, therefore, will seek to appeal to public service, while “not making remuneration incentives so unattractive as to place the companies themselves at risk”.

Remuneration standards had already been developed by the DPE to guide the SoC boards in determining and setting policies for executive management. These seek to align performance with the shareholder compact; but Matona indicated that there was “still a long way to go”.

Edited by: Creamer Media Reporter
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