eBusiness Weekly
Golden Sibanda
Government will craft a new tamper-proof remuneration framework, once the relevant law is in place, for executive and non-executive directors of state owned entities in a move designed to end the culture of impunity that has perennially bled public entities, Finance Minister Patrick Chinamasa has said.
The State entities, which have been making losses year in year out, but ironically rewarded their directors handsomely without linking the generosity to the performance of either the executives or the public entities; heavily relied on the fiscus for bail outs.
Thirty-eight out of 93 State-owned enterprises, which used to account for 40 percent of gross domestic product, but now contribute a mere 2 percent of GDP, incurred a combined $270 million loss as weak corporate governance practices and ineffective control mechanisms took their toll.
Minister Chinamasa said that Clause 14 of the Public Entities Corporate Governance Bill, which went through its second reading in Parliament, last week, was meant to nip in the bud the ludicrous remuneration models typical of most struggling public entities.
The remuneration framework shall be approved by Cabinet.
Minister Chinamasa said Sub-Clause 10 of the public entities Bill will empower the minister responsible for finance to, by way of notice published in the Government Gazette, specify the amount that may be received, as remuneration, allowances and other benefits, by members of the board of any public entity.
Further, this clause will allow a ceiling to be set on the amount of remuneration board members may receive, or even specify an exact amount payable. If a board member breaches the remuneration scale set out in terms of this provision, they will become liable to a surcharge for the purposes of recouping the value of the money improperly paid out
“Clause 12 of the Bill addresses issues surrounding the payment of non-executive members of public entities. In short, the appointing minister shall, in consultation with the minister responsible for finance, develop a ‘remuneration framework’, which shall form the basis upon which payment scales are formulated. That Remuneration Framework is in turn, submitted for Cabinet approval before it is implemented,” he said.
Issues such as the experience and qualifications of a member of the State entity, as well as the prevalent salary scales amongst their peers will be of a persuasive value, but not in itself a benchmark upon which a board member can lay a demand.
The salaries of State entity directors will be paid depending on how a public entity is performing, and how profitable it is at a given time.
“Clause 13 provides for the conditions of service of executive members of public entities. Similar to the above, the minister responsible for the administration of the Public Sector Corporate Governance Bill shall develop model conditions of service for executive members which shall be adhered to and subject to revision where exigencies require so,” Minister Chinamasa said.
Each public entity shall also be expected to draw up a carefully considered strategic plan that maps out their intended objectives over a period of two to six years, and how they intend on achieving such objectives.
This is in terms of Clause 22 of the Public Entities Bill. The strategic plan will include performance indicators against which the company can benchmark its performance and will ensure that the entity strives for a commonly held and understood objective.
“Closely related to this is the new concept of performance contracts that will be entered into by the Chief Executive Officer or a senior member of a public entity that clearly spell out his or her deliverables. These are provided under Clause 23.
“Where such chief executive or senior member of (a given) public entity fail to achieve the set out goals, they become liable to dismissal in terms of the contract,” Minister Chinamasa said.
