Panel to be established to oversee SoE salaries

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Public Enterprises Minister Barbara Hogan says she has set up a nine-person panel to oversee the much-criticised remuneration of top executives at South Africa’s embattled state-owned enterprises (SOEs) that include state arsenal Denel and airline South African Airways.

The panel will be headed by South Africa’s former ambassador to France and the United States Barbara Masakela and will table a final report by May. “(It) will make recommendations and suggest a framework to determine a rational and consistent remuneration model that protects the interests of the SOE, employees of the SOE, the state and the state’s national assets,” she said.

Hogan made the announcement during a briefing to Parliament’s portfolio committee on public enterprises, where MPs grilled top management from South African Airways (SAA), Eskom and Transnet about executive pay packages and progress in a filling a range of high-level vacancies, the South African Press Association reported.

The salaries and bonuses paid to parastatal bosses have caused an outcry in recent years, after sacked SAA chief executive officer Khaya Ngqula received a settlement of R8 million.

His two predecessors at the struggling national carrier left with golden handshakes worth R232 million and R3.6 million respectively. Denel`s most recent annual report indicated that its CE, Talib Sadik, was being paid R5.6 million or R466 666 a month. Denel posted a loss of R544 million last year; an improvement on the R1.6 billion lost in the year-to-March 2006. The Solidarity trade union last month complained that Denel executives had paid themselves a further R4.3 million in bonuses for the year to March 2009, despite the loss. The union also objected to the company imposing a below-inflation 4% salary increase for the year starting next month. Armscor`s latest annual report showed ex-CE Sipho Thomo received a R3.27 million package for the same year.

In October last year the Mabili “Directors Remuneration Report for 2009” noted that difficult “market conditions resulted in ‘reasonably low’ executive pay ?increases in 2009 relative to 2008.” Quoting the repot, the Engineering News said the median South African CE package increased 11.6%, from R4.7-million to R5.3-million, while ?increases enjoyed by executive chairpersons rose 11.6%, to R4.3-million. Total packages ?for CFOs and other senior executives remained almost stagnant at R2.9-million and R2.6-million respectively.

Concern about pay packages grew recently after sacked Eskom CEO Jacob Maroga filed a lawsuit demanding R85-billion in damages from the loss-making electricity utility. The DA charged that a culture of sky-high salaries in SOEs had fuelled Marogo’s expectation that he could win such a big settlement from Eskom. Both Hogan and portfolio committee chairwoman Vytjie Mentor ruled out discussion of the Maroga case, insisting that it was sub judice [before the courts].

Despite Mentor’s view, Parliament has in recent months criticised the rule, saying it did not apply to the legislature. Separately, constitutional law professor,Pierre de Vos has written that the rule, as understood and used by politicians and officials, was scrapped in 2007 in the case of Midi Television v Director of Public Prosecutions, meaning in this case Hogan was withholding information on the basis of a “non-existent legal rule.”

However, Mentor voiced concern that parastatals were contributing to South Africa’s massive wealth gap by paying their executives lavish salaries. “It might not be resonating very well with the economic situation in the country. So is that factored into place when these guidelines are made?”

Meanwhile, Mervyn King, regarded by some as the doyen of corporate governance in South Africa, has criticised the establishment of the panel, saying it is not necessary and adding the guidelines recommended in the King 3 code should be sufficient for any company’s remuneration committee. “To have a committee appointed does not add anything,” King told the Business Report. “King 3 says a recommendation (for a salary to be paid) has to be put before the shareholder – in this case, it would be the minister representing the government – that way we will all know how the shareholder has approved or not approved the recommendation.”

King said each company’s board had to decide what was best for it and, in some instances, pay people a lot of money to retain them. “The panel can lay down the principle but it can’t fix remuneration. Remuneration for Eskom directors would be different to that of Transnet directors,” King said.

But Ebrahim-Khalil Hassen, an independent analyst, said it was important for the government to be seen to be doing something about the concerns raised about executive salaries at parastatals. “The Department of Public Enterprises has traditionally been weak on matters of corporate governance, and the (panel) signals a renewed focus on corporate governance. It is important that remuneration packages be set in a manner to recruit and retain the best talent in public enterprises,” said Hassen. However, he added that there were some gaps in the terms of reference that had to be addressed.

Guy Brazier, a regional leader for Deloitte & Touche in KwaZulu-Natal, said having the panel would achieve a level of public trust, acceptance and consistency, depending on the role of the executives. “The establishment and application of any remuneration framework is the easy part; the challenge, however, will be how individual performance is measured and assessed.”

SA’s main labour federation, the government-aligned Congress of SA Trade Unions (COSATU) also welcomed the panel, saying it hoped it would revise down some salaries that appeared not to be aligned to the individual’s performance.

Others on the panel include Frans Baleni, general secretary of COSATU affiliate National Union of Mineworkers, one of the organisations that have questioned the increasing gap between executive pay and wages of ordinary workers. Also aboard is Peter Harris, managing director of the Resolve Group; KPMG executive Tshidi Mokgabudi; accountant Omar Latiff; Standard Bank human resources director Sipho Ngidi; industrial researcher Jane Barrett; and lawyer and serial black empowerment entrepreneur Thandi Orleyn.

MIDI CASE: http://www.saflii.org/za/cases/ZASCA/2007/56.pdf

Pinocchio’s office wrongly uses sub judice rule (again)

Pierre Vos::

Some readers of this Blog were rather upset when I referred to President Pinocchio after the President had claimed that he did not act against National Police Commissioner Jackie Selebi because no one had brought any information of wrongdoing to his attention.

I am of course the last person in the world who would ever say, “I told you so”, but the affidavit of Acting Director of Public Prosecutions, Mokotedi Mpshe, in which he states that Vusi Pikoli met with the Minister of Justice and with President Mbeki on 10 occasions to inform them of the Jackie Selebi matter seems to suggest that the President was indeed rather economic with the truth. And I told you so.

Asked for comment on this obvious contradiction between the version peddled by our President and that given under oath by the Head of the NPA, the Presidential spokesperson, Mukoni Ratshitanga, said that because the matter was before the court he could not respond, citing the sub judice rule.

If patriotism is the last refuge of scoundrels, then the Mukoni Ratshitanga, said that because the matter was before the court he could not respond, citing the sub judice rule rule is the last refuge of lying politicians. Unfortunately this is not a valid legal excuse as the sub judice rule (at least as it is understood by politicians who find themselves in a spot of bother) was effectively abolished by the Supreme Court of Appeal last year.

The sub judice rule was supposed to prevent people from commenting on a case where such comments would prejudice the outcome of the case in any way. But in Midi Television v Director of Public Prosecutions, Justice Nugent, writing for the full bench, emphasized the importance of freedom of expression for our democracy and developed a very strict test to decide when the exercise of press freedom could be restricted to protect another right or interest.

Judge Nugent argued that a publication could only be gagged if the prejudice that the publication might cause is demonstrable and substantial and there is a real risk that the prejudice will occur if publication takes place. Mere conjecture or speculation that prejudice might occur will not be enough. Even then the court would not gag a paper unless it believes that the disadvantage of curtailing the free flow of information outweighs its advantage.

In making that evaluation the court will not only consider the interests of the newspaper but, more important, the interests of every individual in having access to information. The interest of the public to know would be even more important where the state is trying to stop the publication of embarrassing information and where they would not be able to show that the publication would infringe any of the other rights in the Constitution.

The Presidential spoeksperson reliance on the sub judice rule is therefore completely misplaced and has no standing in law. This is because we have a very real interest in knowing whether the President has lied to the nation while it is difficult to see what demonstrable and substantial prejudice could arise to any party to the case, by a statement from the Presidency either confirming or denying the facts as stated by Mpshe.

Of course, demonstrable and substantial prejudice would occur – but not to any parties before the court, but to the President and his credibility. But in law that would be utterly irrelevant. The sub judice rule therefore is used here to evade political responsibility and accountability for a bare faced lie told by the President (and repeated by him) to get himself out of a tight spot.

The reliance on this rules really only confirms that the President dare not comment because he has been caught out in a lie and confirms, further, the rule of thumb that when a politician seeks to rely on this rule he or she is merely trying to avoid embarrassment and harm to him or herself.

Journalists should be made aware of this so that they can challenge spokespersons who rely on a non-existent rule to evade difficult questions that – if answered truthfully – would embarrass their bosses.