Practices regarding executive remuneration vary significantly across countries. In countries facing specific political or fiscal constraints, remuneration is generally prescribed by law or by separate government decision, with levels standing (sometimes significantly) below the average of SOEs in other countries and lower than market levels in the domestic economy. On the other hand, in countries where remuneration is set at the full discretion of the board, levels are generally higher – sometimes explicitly based on private sector benchmarks.
Average CEO remuneration in commercially oriented SOEs is double that of public policy-oriented SOEs, except in countries where levels are set by law. In many countries, the disparity between remuneration levels of CEOs of large SOEs and small SOEs is also significant. Some outliers exist by sector, such as the air transport sector, where caps may have been derogated to accommodate generally high sectoral pay levels. Unsurprisingly, the remuneration of the CEO is generally higher than the remuneration of other executive managers. In some cases, the differences actually seem to be smaller than may be expected in the private sector. Executive managers are mostly hired on fixed-term contracts rather than on continuous contracts with terms for termination found in the private sector in a number of countries.
Pay packages of executive managers usually include an annual fixed salary, allowances, fringe benefits and payments to the pension plan, and can also include severance payments. Stock options are generally not allowed. In almost all countries, executive managers’ pay packages also include a performance‑based component. The latter, in turn, is capped by the government owner in more than half of surveyed countries, mostly at a percentage of the fixed remuneration component rather than at the absolute level. While limited information is available regarding how performance is benchmarked since these key performance indicators are mostly set at the full discretion of the board and not by government – and thus vary across companies, many countries mention that performance is benchmarked against profitability relative to other companies and compared to the previous year.
In almost all countries, SOEs are required to disclose information on the remuneration levels of executive managers to the general public, along with the remuneration policy including details of the bonus schemes in many countries. In some countries, disclosure requirements apply only to the remuneration of the CEO and/or only in the case of listed companies. Interestingly, some countries which have faced controversy over high executive remuneration have strengthened their disclosure requirements in recent years, in an effort to align them with those applicable to listed companies where information of higher granularity is required to be disclosed. By contrast, the state or ownership entity discloses information on executive remuneration in only around half of the surveyed countries, mainly through a central government portal, or the government or ownership entity’s annual report on SOEs.