Eskom's financial year ended at midnight on March 31. It was a dark year in more ways than one, but the ending of the financial period has thrown up endless questions about management bonuses.
Looking through Eskom's annual reports it turns out that the head of its remuneration committee, Mpho Makwana, is just 37 years old. He is accomplished and well educated. But would he really have had the stature to stand up to Eskom's powerful former CE, Thulani Gcabashe, who was always on the remuneration committee?
Codes of good practice suggest the CE should never be a member of the remuneration committee. With good reason. Gcabashe's pay was higher than that advocated by the government and even higher than that of many people running large listed businesses. Best practice would have shielded him from the suspicion that he was able to manipulate his own salary.
The problem is broader than Eskom. Parastatal pay has tended not only to compete with private business, but in many instances outstrip it. And although parastatals do release annual reports, the pay packages they attempt to explain go largely unnoticed until (in Eskom's case) the lights go out.
Deserving?
Just last week there was news of enormous payouts linked to the Airports Company of SA. And Transnet's annual report records that CE Maria Ramos received R5.1m in guaranteed pay alone. She was also in line for a bonus of almost R3m.
The public enterprises department gives guidelines for parastatals and says the total guaranteed package for the heads of very large organisations should not exceed R3.1m.
It would be easy to argue that Ramos deserves the cash - she appears to have done a good job so far. But the problem with paying out big rewards to managers of state-owned entities is that their projects are long-term by nature. It's often impossible to know, until too late, whether the recipient of the cash deserved it.
Parastatals also like to use the argument that if they don't pay as well as private business, they won't be able to attract the best staff. But if you have a look at executive remuneration at Telkom, it has been less than Eskom's.
And while many don't love Telkom, it can claim a successful share price, a service that mostly works and a pricing regime that keeps getting cheaper. Payback
Eskom's remuneration committee has the power to ask Gcabashe to pay back what now looks like undeserved bonuses. But that won't happen. For one thing it was the government that stalled the building of excess capacity, not Gcabashe. For another, he may already have spent the money. Attaching his assets would amount to throwing him out on the street.
The sad irony is that Eskom's current management has probably never worked so hard and never been so deserving of a bonus, but national sentiment will disallow rewards.
Some of the public sector share schemes, however, may pay out no matter what - they were designed and agreed upon more than three years ago. But what Eskom's bonuses have brought to the fore is the government's apathetic attitude as a shareholder and its inability to influence its own assets.
If the government wants to avoid similar scandals in future, it is going to have to pay attention, speak loudly and have a whip to crack.
http://www.news24.com/News24/MyNews2...298318,00.html
Looking through Eskom's annual reports it turns out that the head of its remuneration committee, Mpho Makwana, is just 37 years old. He is accomplished and well educated. But would he really have had the stature to stand up to Eskom's powerful former CE, Thulani Gcabashe, who was always on the remuneration committee?
Codes of good practice suggest the CE should never be a member of the remuneration committee. With good reason. Gcabashe's pay was higher than that advocated by the government and even higher than that of many people running large listed businesses. Best practice would have shielded him from the suspicion that he was able to manipulate his own salary.
The problem is broader than Eskom. Parastatal pay has tended not only to compete with private business, but in many instances outstrip it. And although parastatals do release annual reports, the pay packages they attempt to explain go largely unnoticed until (in Eskom's case) the lights go out.
Deserving?
Just last week there was news of enormous payouts linked to the Airports Company of SA. And Transnet's annual report records that CE Maria Ramos received R5.1m in guaranteed pay alone. She was also in line for a bonus of almost R3m.
The public enterprises department gives guidelines for parastatals and says the total guaranteed package for the heads of very large organisations should not exceed R3.1m.
It would be easy to argue that Ramos deserves the cash - she appears to have done a good job so far. But the problem with paying out big rewards to managers of state-owned entities is that their projects are long-term by nature. It's often impossible to know, until too late, whether the recipient of the cash deserved it.
Parastatals also like to use the argument that if they don't pay as well as private business, they won't be able to attract the best staff. But if you have a look at executive remuneration at Telkom, it has been less than Eskom's.
And while many don't love Telkom, it can claim a successful share price, a service that mostly works and a pricing regime that keeps getting cheaper. Payback
Eskom's remuneration committee has the power to ask Gcabashe to pay back what now looks like undeserved bonuses. But that won't happen. For one thing it was the government that stalled the building of excess capacity, not Gcabashe. For another, he may already have spent the money. Attaching his assets would amount to throwing him out on the street.
The sad irony is that Eskom's current management has probably never worked so hard and never been so deserving of a bonus, but national sentiment will disallow rewards.
Some of the public sector share schemes, however, may pay out no matter what - they were designed and agreed upon more than three years ago. But what Eskom's bonuses have brought to the fore is the government's apathetic attitude as a shareholder and its inability to influence its own assets.
If the government wants to avoid similar scandals in future, it is going to have to pay attention, speak loudly and have a whip to crack.
http://www.news24.com/News24/MyNews2...298318,00.html
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