Putting A Cap On CEO Pay

WE would like to see Namibia putting a cap on executive pay, particularly when it relates to the Chief Executive Officers of State-Owned Enterprises, or parastatals, as they are also known.

Everyone is now aware that such a move is currently underway in the US in the wake of public anger at the fact that despite multimillion-dollar bailouts, CEOs of such companies have continued to receive huge packages and bonuses to boot.As US President Obama said recently: ‘This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success. And we believe that success should be rewarded. But what gets people upset – and rightfully so – are executives being rewarded for failure. Especially when those rewards are subsidised by US taxpayers’.Ditto Namibia.In our case an investigation was launched years back into the remuneration for top executives of SOEs, but if the probe was concluded, we still don’t know what the recommendations were, and they’ve certainly never been implemented, at least to our knowledge. It is high time we revisit this issue, particularly in view of the recession that has hit industrialised countries hard, and is sooner or later going to make its presence felt right here in Namibia.Most of our parastatals have had a history of bailouts. It is not a new phenomenon in Namibia as it is currently in the US, and various SOEs have been mismanaged by one CEO, only to be replaced by another who’s taking things from bad to worse. And when that happens, inevitably, they are handsomely rewarded to vacate office.It is precisely this problem – ‘rewarding executives for failure’, in the words of the US President, that our country can no longer afford, and yet has done so since Independence.This week President Obama announced executive pay limits in a bid to hold the financial industry accountable to taxpayers while aiming to change entrenched corporate culture that endorses outsize bonuses and perks that often bear little relationship to corporate performance.The new rules would set a US$500 000 cap on cash compensation for most senior executives, curtail severance pay when they leave the company, as well as other measures.That is not to say that the Obama Administration will succeed in its aims, because corporate executives are nothing if not creative in coming up with ways and means to create new forms of compensation. We may not succeed in Namibia either, but what we really have to do, sooner rather than later, is to at least put some measures in place right now before the crunch comes.And while we’re at it, it really would do no harm for Government, once and for all, to ensure that the executives they do appoint to parastatals and SOEs HAVE to be knowledgeable and competent in the posts they occupy. There is absolutely no room for politics and preferences at such a high level of management. The need, on the contrary, is for highly skilled, hardworking appointments in which merit is the operative word.And inasmuch as we require that such CEOs be equipped for the posts they undertake, so too is it unfair to cause heads to roll for purely political reasons. The result of such arbitrary actions is only increased cost to the taxpayer, because in the main, ineffective CEOs and those who are axed for political reasons alike are given handsome packages in order for them to ‘go quietly’. It remains unacceptable because our country cannot afford these ‘golden handshakes’.We would request Government, and the President in particular, to once again scrutinise the remuneration packages of our CEOs because the information collated years ago will be outdated by now. We cannot, of course, implement the same ceilings as the US, and ours should be modest in comparison, given the comparative size of our respective economies. There is no reason why such executives cannot be well paid, but in return they should be required to pay the price themselves when economic downturn is upon us and when their workforce faces retrenchment and they in turn require government bailouts. Putting a lid on state-owned enterprise CEO salaries is just one of the measures that we should be taking, as we face economically tough times.