Abstract
Orientation: Over the years, the increase in executive remuneration in state-owned entities (SOEs) has been the subject of intense discussions. The poor performance of some SOEs with highly remunerated executives begs the question of whether chief executive officers in South African SOEs deserve the high levels of remuneration they receive.Research purpose: This study examined the relationship between chief executive remuneration and several measures of company performance across Schedule 2 SOEs within South Africa.Motivation for the study: Notwithstanding the widely publicised poor performance of South African SOEs, their importance and relevance remains evident. Regrettably, the literature on what fundamentally drives their performance is lacking.Research design, approach and method: This quantitative, longitudinal study, conducted over a 9-year period, collected secondary data from the annual reports of 18 Schedule 2 SOEs. The primary statistical technique used in the study was ordinary least square (OLS) multiple regression analysis on a pooled dataset. Chief executive remuneration consisted of fixed salary and total remuneration.Main findings: A relationship was found between chief executive remuneration and company performance, although mainly an inverse relationship.Practical and managerial implications: The improved understanding and knowledge of the relationship between chief executive remuneration and SOE performance may be used by the organisation and HR practitioners to direct and inform strategies for organisational effectiveness and business excellence.Contribution or value-add: This research provides new knowledge to the limited research available on SOEs in South Africa. Further, it reveals an unexplored area of potential research, that is, the importance of irregular, fruitless and wasteful expenditure as a performance measure in SOEs.
Highlights
Key focus of the studyQuestions such as ‘Are South African executives’ packages linked to performance?’ come to mind when reading various newspapers, as well as academic and business articles
State-owned entities play a vital role in the economies of many countries, and the outrage over what many consider to be excessive chief executive officers (CEOs) remuneration warrants research and plays an important role throughout South Africa (Corporate Governance of State-Owned Enterprises in Africa, 2009)
Median 1679000.00 2062141.50 2044607.00 2470000.00 2550500.00 2808500.00 3319964.00 3182000.00 3063420.50 between the means and medians for the CEO remuneration components and company performance, the researchers reported on the medians
Summary
Questions such as ‘Are South African executives’ packages linked to performance?’ come to mind when reading various newspapers, as well as academic and business articles. The focus of this study was Schedule 2 state-owned entities (SOEs) in South Africa. Two cases in point follow, the first being the R9467 million total remuneration (TR) that Brian Molefe – Eskom’s former acting CEO – received during the 2015/2016 financial year (Peyper, 2016). During 2017, the South African government announced that SAA will receive an undisclosed sum from the National Revenue Fund in order to pay back loans of approximately R2.3bn to Standard Chartered Bank (Rothpletz, 2017). During 2017, the South African government announced that SAA will receive an undisclosed sum from the National Revenue Fund in order to pay back loans of approximately R2.3bn to Standard Chartered Bank (Rothpletz, 2017). Rothpletz (2017) reports that SAA, in total, has borrowed R19bn from government
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