SOE bosses face new pay rules

STATE-owned entities might be forced to publicly reveal the salaries of their chief executives, as well as senior and middle managers, if recommendations made from an investigation are approved.

This information is contained in a draft report by EY, formerly Ernst & Young, dated September 2016.

The report, titled ‘Report on classification of public enterprises into tiers and remuneration directive’, looked at salary scales, board fees and recommendations on how officials will be rewarded for meeting targets.

The report, seen by The Namibian, shows that the days of SOE bosses hiding how much they earned are numbered. SOE bosses have over the years increased and concealed their salaries, despite regulations which set a limit on how much parastatal executives should earn.

“The guaranteed remuneration levels received by the individual chief executive officer or managing director, senior management staff and middle management staff, must be publicly disclosed in the annual report of the public enterprise,” the proposal said.

The report said emerging global practice requires that state companies publicly disclose, by name, the earnings of a chief executive, senior managers, board members and non-executive directors.

Public enterprises minister Leon Jooste confirmed the report yesterday, but declined to provide exact details as it is yet to be discussed in Cabinet.

He, however, said the new regulations of how salary matters are handled is a “massive departure from the previous system in that it will herald the introduction of a performance-based system for the first time”.

“Remuneration will be incentivised with a basic salary and a performance incentive, based on reaching actual key performance indicators,” he said.

According to Jooste, key performance indicators will consist of economic and operational items, and will include compliance related indicators to ensure compliance in future.

The proposed regulations, attached to the draft report, show that the minister of public enterprises will play a big role in awarding salary increments to SOEs’ top executives.

Although one of the new regulations allows a parastatal to pay newly-appointed chief executives, and senior and middle managers according to their company set-up, the new rules said those salaries will be reviewed every year.

“A decision will be made by the ministry of public enterprises whether to increase the remuneration levels and by how much, or whether not to increase the remuneration,” the proposed regulations said.

Should a decision be made to adjust the remuneration levels, the adjusted wages and salary directives shall be gazetted, the proposed rules said.

In case the board of directors of a state company wants to offer an annual guaranteed salary which exceeds the maximum threshold, the board, through the line minister, should seek approval from the public enterprises minister.

The approval should accompany detailed answers, such as responsibilities, scarcity of skills, impact on the economy and the complexity of the industry.

The remuneration and other benefits of the chief executive, senior and middle managers must be determined by the board, with concurrence of the portfolio minister, and with “due regard to the directives laid down by the public enterprises minister.

The board fees will be determined by the line minister following the rules set up by the SOE ministry.

A chief executive or parastatal board which contravenes those rules will be fined not more than N$100 000, imprisonment of 10 years, or both.

The new rules also allow parastatal managers to be rewarded for achieving short or long-term goals.

“The general purpose of performance-related remuneration is to promote the sustainable performance of the enterprise over the short, medium and long term,” the proposed regulation said.

The short and long-term payments should also be publicly revealed and analysed in the annual reports of each parastatal, the document said.

“Long-term incentives aim to reward the achievement of performance measures over a period of three years from the time of measuring performance, while short-term incentives typically reward performance measured over a year,” the draft said.

The regulation warns that short-term rewards should only be considered if targets are met or exceeded. These rewards exclude non-executives.

“Where performance is below acceptable levels, no bonus will be paid out. It should generally be recognised that incentives are payable for incremental performance above minimum expectations,” the document said.

If targets are met, a reward should be made, but it will depend on the performance of the parastatal and the decision of the board, the proposed rules said.

The survey was designed to capture information such as total assets, total revenue, employment statistics, importance, market competitiveness, pricing regimes and scarce skills.

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