State challenged on directors' pay freeze
STATE-OWNED companies have challenged a decision by government to freeze pay increases for chief executives and senior executives and a similar freeze on increasing attendance fees for board members of these entities.
Matsietsi Mokholo, deputy director-general for legal services in the Department of Public Enterprises, told Parliament yesterday that the moratorium - which was put in place in 2009 pending a review of executive pay at state-owned companies - had not gone down well with executives and board members of these entities.
"Every single day the minister receives a request from state-owned companies, all of them, either being the boards or the executives and motivations for increases. The response is the same, the minister says we will not consider any increase up until this process is finalised," she said.
Mokholo said state-owned companies argued that the decision to bar them from increasing executives pay, incentives and board member fees was hampering their ability to attract qualified and highly skilled managers, especially from the private sector.
"We face a challenge from state-owned companies because they say the moratorium has been in place since 2009 and at every AGM they ask when are we finalising the review," she said.
Public Enterprises Minister Malusi Gigaba told Parliament's standing committee on public accounts last month the freezing of executives' pay increases at all state-owned entities under his department would be in place until a proper remuneration policy had been put in place.
"Remuneration generally of executives is quite high and does not contribute to bridging the inequality gaps between the highest paid and lowest paid," he said.
Mokholo yesterday presented a progress report on the work that had been done by the panel tasked with reviewing executives' pay so far. She said the panel had taken a provisional report containing a set of recommendations on the restructuring of executives' pay and incentives to cabinet.
Among its recommendations was a remodelling of short-term incentives such as once-off bonuses to link them to performance and abolishing long-term incentives for executive directors such as retention fees.
If the recommendations of the panel are accepted, the size and asset value of state-owned companies will not be accepted as a reason for paying executives at larger entities more than those of smaller state-owned companies.
The department was also concerned about state-owned companies bench-marking themselves against JSE-listed companies in terms of executive remuneration when their mandates are different from those of such companies.