earningsSunday Times Business Times reports that executives of nonperforming state-owned enterprises (SOEs) that rely on government bailouts for survival are set to lose out on bonuses and the hefty pay increases they have received in the past.  

A policy directive approved by the cabinet stipulates that all future incentive schemes should be based on income statements rather than balance sheets.  The head of the policy unit in the presidency, Busani Ngcaweni, indicated last week that the directive was aimed at preventing executives of underperforming SOEs from granting themselves excessive bonuses.  He said the change was in line with recommendations of the Presidential Review Committee on SOEs.  He explained further:  "There have been SOEs in the past where the incentive system is built around the balance sheet, not the income statement, which means when they get a bailout it sits on the balance sheet and then they get big bonuses.  We are saying 'No, shift it to performance’.  It cannot be that you earn so much in bonuses over time and the only indicator you use to earn maximum [bonuses] has nothing to do with the performance of that institution."   Ngcaweni added:  "Just because you manage 10,000 people, because it's a complex institution, you get the maximum bonus; but on the overperformance side, you got a bailout from government.  That has to stop."


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