This chapter takes stock of policies and practices underpinning the remuneration of executive managers of SOEs across countries. It takes stock of executive remuneration levels and pay packages, and explores the extent to which the state as an owner influences the board of directors’ autonomy to decide on managerial remuneration and incentives. The chapter also presents good transparency and disclosure practices.
Remuneration of Boards of Directors and Executive Management in State-Owned Enterprises
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3. Remuneration schemes applicable to executive management of SOEs
Abstract
3.1. Introduction
Managerial remuneration in SOEs straddles the spheres of corporate and public sector governance. On one hand, adequate remuneration levels are crucial for attracting competent executive managers in SOEs and to incentivise them in accordance with the interests of the owners. On the other hand, for political and societal reasons care must be taken to avoid setting these at a level perceived by the general public as being too high. The SOE Guidelines imply that care should be taken to ensure that the state owners do not infringe on the boards’ role in determining managerial salaries. If the state wishes to influence this, general rules should be established and/or owners’ expectations regarding remuneration should be communicated to the boards through the usual channels of control.
Main findings
Remuneration levels, policies and practices
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, as well as 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.
Regardless of the way in which remuneration policies are established, average CEO remuneration is twice as high in commercially oriented SOEs as in 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 in some sectors, for instance the air transport sector, where caps may have been derogated in order 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 might have been expected in the private sector.
The majority of countries hire executive managers on fixed-term contracts, while only eight countries exclusively hire executive managers – including both the CEO and other members of the management board – on continuous contracts with terms for termination, like in the private sector. In these countries, the boards also set remuneration levels at their full discretion, similar to private sector practices. In six countries, both contractual relationships are possible.
Remuneration components
Pay packages of executive managers usually include an annual fixed salary (which can be based on the consumer price index or set as a multiple of the average nominal wage), allowances, fringe benefits and payments to the pension plan, and can also include severance payments. Stock options are not allowed in all but two countries.
In all but five of the surveyed countries, executive managers’ pay packages also include a performance‑based component, which is capped by the government owner in more than half of surveyed countries, either at the absolute level (in around one‑fifth of countries), or at a percentage of the fixed remuneration component (in around four‑fifths of countries).
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 (sometimes upon recommendations of the remuneration committee) 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 many countries, performance of the CEO is also benchmarked against both corporate (SOE‑level) and individual performance indicators. Financial and non-financial indicators can be both qualitative and quantitative.
Transparency and disclosure practices
In all but two 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 for the remuneration of the CEO and/or only in the case of listed companies. In some countries, some SOEs also disclose disaggregated information on the fixed and variable remuneration components. While SOEs are mainly required to disclose this information in their annual reports or websites, a separate remuneration report is required to be prepared by the company or the remuneration committee in two countries.
By contrast, the state or ownership entity does not disclose information on executive remuneration in almost half of the surveyed countries, mainly because individual SOEs are already required to do so. In the 15 countries where the government does disclose granular information, this is mainly done through a central government portal, or the government or ownership entity’s annual report on SOEs.
3.2. Actual remuneration levels of executive managers according to SOE corporate characteristics
Similar to trends regarding board remuneration, CEOs of public policy-oriented SOEs receive lower annual nominal compensation (USD 137 452 on average, representing approximately 5 times the amount of average annual national wages of production workers) than CEOs of commercially oriented SOEs (USD 201 635 on average, representing almost seven times the amount of the average annual national wages of production workers). Croatia and Turkey stand as exceptions, as remuneration levels are prescribed by law (Figure 3.1). The three countries which set the highest annual nominal wages for CEOs of commercially oriented SOEs in absolute terms (New Zealand, Sweden, Finland) also remain above average when remuneration levels are captured as a multiple of average annual national wages (Figure 3.2).
Relatively high remuneration levels in New Zealand can be explained by the fact that unlike other countries in the figure, data includes both fixed and variable remuneration components, in addition to the fact that bonuses granted to executive managers of commercially oriented SOEs are not capped, and defined at the full discretion of the board. In Sweden, although remuneration levels are relatively high compared to other countries, evidence suggests that levels are above medium market levels for small SOEs but below market levels for large SOEs (Swedish Government, 2021[1]). This may be due to the fact that pay packages of executive managers do not include a performance‑related component. Anecdotal evidence also suggests that this has hampered recruitment, with CEO prospects turning down offers in some instances.
Figure 3.1. Average annual remuneration of CEOs of SOEs (fixed remuneration only, in USD as of 2020)
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Note: Data covers executive remuneration of SOEs with a state shareholding of at least 50%, which are not listed on the stock exchange, except for Chile where data includes one listed SOE (ZOFRI), albeit with remuneration levels similar to those of non-listed SOEs. Data includes fixed remuneration only, except for Brazil, Estonia, Finland, Latvia, the Netherlands and New Zealand where both fixed and variable remuneration are included. In Chile, France, the Netherlands, Peru, Portugal and Sweden, all SOEs are classified as commercially oriented. See Annex C for details.
Source: Author, based on questionnaire responses, and calculations using the OECD database (https://data.oecd.org/earnwage/average‑wages.htm) and ILOSTAT database (https://ilostat.ilo.org/topics/wages/).
Similar to trends on board remuneration, high executive remuneration levels displayed as a percentage of average annual national wages in Brazil and Peru can likely be explained by low average nominal wages in these countries and the need to set remuneration levels at a high threshold in order for them to remain competitive with private sector peers. Besides, in Brazil, unlike other countries in the figure, data includes both the fixed and variable remuneration components. The latter can vary from 16% to 100% of the fixed remuneration depending on the company size and sector of operation.
In many countries, the disparity between remuneration levels of CEOs of large SOEs and small SOEs is also significant. For instance, CEO remuneration of large SOEs is equal to 3.6 times the remuneration amount of CEOs of small SOEs in Austria, 5.2 times the amount in Latvia, and 5.6 times in the Netherlands. This may be due to outliers in the air transport sector. For instance, in New Zealand, the remuneration of the CEO of one large commercially oriented SOE amounts to NZD 4 500 000. Other countries report that higher remuneration tends to be offered to executives of SOEs operating in the financial sector (Brazil, Colombia, Iceland, Norway, United Kingdom), energy sector (Brazil, Colombia, the Czech Republic, Greece, New Zealand), water sector (Greece) and health sector (Portugal). These cases may be explained by the fact that caps may have been derogated in order to accommodate generally high sectoral pay levels.
While limited data is available on the remuneration levels of chief financial officers (CFOs) and chief operating officers (COOs) across countries, evidence suggests that the remuneration of CEOs is generally higher than the remuneration of other executive managers, albeit not significantly in most cases.
Figure 3.2. Average annual remuneration of CEOs of SOEs (fixed remuneration only, as a multiple of average annual national wages)
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Note: Data covers executive remuneration of SOEs with a state shareholding of at least 50%, which are not listed on the stock exchange, except for Chile where data includes one listed SOE (ZOFRI), albeit with remuneration levels similar to those of non-listed SOEs. Data includes fixed remuneration only, except for Brazil, Estonia, Finland, Latvia, the Netherlands and New Zealand where both fixed and variable remuneration are included. In Chile, France, the Netherlands, Peru, Portugal and Sweden, all SOEs are classified as commercially oriented. See Annex C for details.
Source: Author, based on questionnaire responses, and calculations using the OECD database (https://data.oecd.org/earnwage/average‑wages.htm) and ILOSTAT database (https://ilostat.ilo.org/topics/wages/).
In terms of comparison with private sector levels, some countries report that the remuneration of executives is comparable to private sector peers, especially in countries where the board is responsible for setting remuneration levels – sometimes based on private sector benchmarks (Estonia, Finland, New Zealand, Norway, the Slovak Republic, United Kingdom), or where it is provided by cabinet decision that remuneration levels must correspond to the first quartile of the market (Chile). However, similar to the remuneration levels of board members, many countries also report that the remuneration of executive managers stands below market levels (Costa Rica, Croatia, France, Greece, Ireland, Israel, Latvia, Spain) especially for executives of medium-sized and small SOEs (Iceland, Lithuania).
While this is mainly due to government-imposed caps on remuneration, some countries report that these have hampered recruitment. For instance, in Costa Rica, freezes of chief executive wages and the establishment of remuneration caps have reportedly “degraded” the institutional salary scale in absolute terms and created “inverted” gaps between senior managers and the rest of the administration, while also hampering recruitment by preventing SOEs from using market research-based remuneration practices. In Greece, the lower remuneration levels of executives of SOEs subjected to remuneration caps implemented during the 2008 global financial crisis reportedly hampers recruitment. As such, differentiated remuneration rules for executives of “large” SOEs (with more than 3 000 employees and EUR 100 million of annual turnover) were introduced in 2015 in order to facilitate the recruitment of qualified professionals. In Belgium, it is reported that the cap on the basic remuneration of SOEs’ CEOs has led some executives to leave the company when it was introduced.
On the other hand, uncapped and “competitive” remuneration levels of executive managers can be perceived as being unreasonably high, and thus can spur public controversy. For instance, in Norway, media coverage of SOEs focuses on remuneration levels of executives being too high. In Lithuania, although remuneration levels of SOEs’ CEOs are moderate compared to market levels, the remuneration levels of senior civil servants are usually lower than those of the CEOs of large and medium-sized SOEs, which are thus perceived as excessively high. Likewise, in the United Kingdom, although remuneration is well below industry equivalents, senior pay is often very high compared to the average national wage, resulting in remuneration being often subject to public scrutiny and controversy, especially following the award of large bonuses.
3.3. Remuneration policies and practices
The SOE Guidelines state that the remuneration of both SOE boards and executive management should be aligned with the long-term interest of the enterprise. Concerning the executive management, the SOE Guidelines further offer that boards should “decide, subject to applicable rules established by the state, on the compensation of the CEO” (annotations to Chapter VII, point B).
3.3.1. Remuneration models
In 16 of the 34 surveyed countries with available information, remuneration policies and levels applicable to executive managers are set by the boards, either at their full discretion (in nine countries), or within overall limits set by government (in seven countries). In three of these countries, while the remuneration of the CEO is decided by the board, the remuneration levels of the rest of the executive managers are either decided by the CEO (Norway,1 Sweden), or decided by the board based on the CEO’s proposal (United Kingdom).
In another seven countries, remuneration is proposed by the boards and submitted to the AGM for approval on the limits. In some of these countries, after limits have been set, the supervisory board decides in a discretionary manner on the actual remuneration levels of the members of the executive board (France, Japan, the Netherlands). On the other hand, in nine of the surveyed countries, remuneration levels of executive managers are either set by law, or by the government against public sector wage grids (Figure 3.3). It should be noted that some countries fall into several categories, as different policies and practices apply to SOEs depending on their corporate form, share of state ownership and/or commercial and non-commercial orientation (Austria, Colombia, Costa Rica, Greece, Ireland, Switzerland). Detailed information on individual national practices is provided in Table 3.3.
Overall, the remuneration committee does systematically play, or can play, a role in setting the remuneration levels of executive managers in 14 of the surveyed countries, mainly including those where the remuneration levels are set by the board.
Figure 3.3. Remuneration policies and practices for executive managers of SOEs
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Note: Data unavailable for Peru and Spain. In Germany and Ireland, processes respectively differ according to the corporate form of SOEs and their orientation. See Table 3.3 for details.
Source: Author, based on questionnaire responses and desk research.
3.3.2. Contractual relationships of executive managers
The majority of countries hire executive managers on fixed-term contracts, while only eight countries exclusively hire executive managers – including both the CEO and other members of the management board – on continuous contracts with terms for termination, like in the private sector. In these countries, the boards also set remuneration levels at their full discretion, similar to private sector practices. In six countries, both contractual relationships are possible. For instance, in Costa Rica, Ireland and the Slovak Republic, CEOs are hired on fixed-term contracts, but the rest of the executive managers are offered continuous contracts with terms for termination (Table 3.3).
3.3.3. Remuneration components
The SOE Guidelines state that boards “should ensure that the CEO’s remuneration is tied to performance and duly disclosed”. They further posit that “compensation packages for senior executives should be competitive, but care should be taken not to incentivise management in a way inconsistent with the long term interest of the enterprise and its owners. The introduction of malus and claw-back provisions is considered a good practice…” (annotations to Chapter VII, point B). This effectively recommends the inclusion of a performance‑related element in executive managers’ pay packages.
Overall, in almost all countries, the remuneration packages of SOE executive managers include a performance‑based component. While limited information is available regarding the other components of pay packages of executive managers, evidence suggests that pay packages usually include an annual fixed salary (which can be based on the consumer price index, such as in Israel, or as a multiple of the average nominal wage, such as in the Slovak Republic), allowances, fringe benefits and payments to the pension plan, and can also include severance payments. Stock options are usually not allowed, except in Switzerland, and for partially listed companies in New Zealand. In the Philippines, executive managers of SOEs are subject to the remuneration scheme applicable to National Government Agencies.
Variable remuneration
In almost all of the surveyed countries (85%), the remuneration packages of executive managers include a performance‑based component. In four of the five countries where it is not granted (Hungary, Iceland, Sweden, Turkey), other forms of benefits exist. In Ireland, performance‑related awards (PRAs) granted to CEOs of both commercial and non-commercial state bodies were suspended in 2009 in the context of the global economic downturn, and have not been reintroduced since.
Among the 29 surveyed countries that grant performance‑related compensation to executive managers, this variable component is capped by the state owner in all but nine countries (Austria, Belgium, Costa Rica, Croatia, Japan, Mexico, New Zealand, Switzerland, United Kingdom). In Austria, while there are no formal caps, performance‑related compensation is determined by the chair of the board in co‑ordination with the shareholding ministry. In Belgium, no government caps exist, but variable remuneration can be capped at the SOEs’ discretion. In New Zealand, while there are not caps for commercially oriented SOEs – which are determined at the full discretion of the board – no discretionary bonuses are granted to CEOs of public policy-oriented SOEs. In Switzerland, while no caps on remuneration currently exist, the issue is a subject of ongoing debates in parliament.2 It should also be noted that in Costa Rica and Croatia, only two SOEs in each country pay performance‑related compensation to executives, as executive remuneration in these countries is subject to a unified salary system set by law.
Among the 20 countries that cap performance‑related compensation, one‑third cap it at the absolute level, while the remaining 70% cap it at a percentage of the fixed remuneration (Figure 3.4). Overall, different approaches exist across countries for capping performance‑based compensation (Table 3.1).
Figure 3.4. Performance‑related remuneration component of executive managers of SOE
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Note: Information unavailable for Peru and Spain.
Source: Author, based on questionnaire responses.
Table 3.1. Selected approaches for capping performance‑related compensation of executives of SOEs
Country |
Provisions |
|
---|---|---|
Brazil |
Variable remuneration is paid to executive managers of non-dependent SOEs only, and is only granted if the company achieves a certain level of net profit. |
|
Colombia |
While variable remuneration can be capped either way, the performance‑related compensation of public officials must be capped at a percentage of the fixed remuneration according to Decree 304 of 2020. |
|
Czech Republic |
In addition to the cap on performance‑related compensation, the application of the competitive clause and severance payment – if granted – should in total not exceed six times the average monthly earnings. |
|
Finland |
The government resolution on the state ownership policy sets clear limits for the bonuses, which vary according to company categories, including a) listed or major commercial companies, b) small and medium-sized commercial companies and c) special assignment companies. |
|
Korea |
According to Article 7 of the Guidelines for Remuneration for Executive Officers of Public Corporations and Quasi-governmental institutions, the performance‑based bonuses for management performance evaluation of the head of public corporations should be capped at 120% of the basic annual salary of the preceding year. |
|
Latvia |
The annual bonus should not exceed twice the amount of the monthly salary of the previous year. In addition, the remuneration of the other management board members is capped at 90% of the remuneration of the CEO. |
|
Lithuania |
According to the Remuneration Resolution, the variable component of the monthly salary of the executive of the enterprise cannot exceed 50% of the fixed component. Executive managers can also be awarded with an annual bonus from the profit of the enterprise, which cannot exceed the amount of four fixed remuneration components. |
|
Netherlands |
The variable component is capped at 20% of the fixed component. |
|
Norway |
According to the state’s Guidelines for executive remuneration in SOEs, the government does not support bonuses exceeding 50% of the fixed annual salary. However, in listed companies, the government may support schemes where the combined bonus and stock related schemes does not exceed 80% of the fixed annual salary. |
|
Philippines |
The performance‑based bonus (PBB) rates applicable to executive managers are determined by Section 6.2.1. of the GCG M.C. No. 2019‑02 on the Interim Performance‑Based Bonus. The rates of the PBB should be based on the performance of the individual executive manager, with the rates of incentives set as a multiple of the individual’s monthly basic salary (MBS) of the applicable year. |
|
Slovak Republic |
While the variable remuneration of executives of wholly-owned SOEs is capped at 50% of their fixed remuneration, the variable compensation of executives of statutory enterprises is capped at both an absolute level and at a percentage of the disposable profit of the enterprises. In particular, the monthly salary of a CEO of a statutory enterprise cannot exceed eight times the average wage in the national economy for the previous year, and the annual remuneration (including share on profit) cannot exceed 10% of the disposable profit of the enterprise. |
Source: Author, based on questionnaire responses.
While limited information is available regarding how performance is benchmarked since these key performance indicators (KPIs) are mostly set at the full discretion of the board (sometimes upon recommendations of the remuneration committee) 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 many countries, performance of the CEO is also benchmarked against both corporate (SOE‑level) and individual performance indicators. Financial and non-financial indicators can be both qualitative and quantitative.
In some countries, KPIs are set by government or shareholding ministers. In New Zealand, for state‑owned enterprises and crown entities (falling under the respective legislative frameworks of the same names), performance is benchmarked against the targets set in the Statement of Corporate Intent and Statement of Performance Expectations (respectively). These are documents that comprise annual, publically accountable, key performance indicators and are approved by shareholding and responsible ministers before the start of each financial year. In Korea and the Philippines, guidance and criteria for eligibility to performance‑based remuneration are set by law (Box 3.1). In Switzerland, while the board is responsible for setting detailed KPIs, Article 8 of the ordonnance sur la rémuneration provides general guidance by stating that “bonuses are generally based on the average performance over at least two years and are increased or decreased accordingly. Both financial and qualitative criteria shall be applied as assessment criteria”.
Box 3.1. Criteria and methods for evaluating the performance of executive managers of SOEs in Korea and the Philippines
Korea
According to Article 48 of the Act on Management of Public Institutions, the criteria and methods for the evaluation of management performance should be prescribed by the Minister of Economy and Finance through deliberation and resolution by the Steering Committee, in such a manner that the following matters should be included in the evaluation of a public corporation or quasi-governmental institution:
1. The rationality and achievement level of management goals
2. The public nature and efficiency of major projects
3. The adequacy of organisational and personnel management, including types of employment of employees
4. Soundness in financial management and budget-saving efforts, including the implementation of the mid- and long-term financial management plan established under Article 39‑2
5. Results of the customer satisfaction survey conducted under Article 13 (2)
6. Operation of a rational performance‑based payment system
7. Other matters related to the management of the public corporation or quasi-governmental institution.
Financial and non-financial performance targets and indicators are newly determined each year by the consultation of the Ministry of Economy and Finance, the evaluation team for the management of public corporations and quasi-governmental institutions, and SOEs subject for evaluation.
According to Article 27 of the Enforcement Decree of the Act on the Management of Public Institutions, the Minister of Economy and Finance shall prepare a manual for the management performance evaluation before the beginning of each fiscal year, and may, after deliberation and resolution by the Steering Committee, take follow-up measures, such as making suggestions or demands concerning personnel or budgetary actions, or deciding on the piece rate.
Philippines
Eligibility for the performance‑based bonus (PBB) is anchored on both the performance of the SOE and of the individual executive manager. Certain eligibility requirements are set by GCG M.C. No. 2019‑02, as detailed below:
Table 3.2. Eligibility criteria for performance‑based compensation in the Philippine
SOE level |
Individual level |
---|---|
At least 90% in the SOE Performance Scorecard |
At least “satisfactory” ratings based on the SOE’s Strategic Performance Management System (SPMS) |
Satisfaction of Good Governance Conditions that are common to National Government Agencies and Specific to SOEs |
Length of service: at least nine months for a full grant; at least three months but less than nine months for a pro-rated grant |
Compliance to all other conditions and requirements |
Compliance to all other conditions and requirements |
Source: Author, based on country responses to the OECD questionnaire.
Table 3.3. Remuneration policies and practices for executive managers of SOEs across 34 jurisdictions
Country |
Remuneration-setting procedures |
Additional provisions |
---|---|---|
Australia |
The Remuneration Tribunal allocates each principal executive offices (PEO) to a classification band, which it then publishes, the highest being Band E which allows fixed remuneration above USD 570 000, with no upper limit. The Tribunal also writes to each SOE Board Chair periodically (generally annually) to advise the Tribunal’s determination of the PEO’s reference rate for fixed remuneration, which is determined by the Tribunal in accordance with the PEO’s Band. The Board then has discretion to set PEO fixed remuneration between 10% below and 5% above the Tribunal reference rate. Boards also have discretion to set and assess performance incentive payments, but must have regard to any guidance the Tribunal may provide. |
❍1 ■ |
Austria |
Executive managers are appointed on fixed-term contracts of up to five years, as provided by the law governing the filling of positions (Stellenbesetzungsgesetz BGBl. I 26/1998). While the Federal Ministry which exercises ownership functions is responsible for the appointment of management board members of SOEs under the legal form of limited liability companies (GmbH), members of the management board of stock corporations (Aktiengesellschaft) are appointed by the supervisory board. Overall, SOE boards usually set remuneration levels at their own discretion, taking in consideration the company’s orientation, as well as remuneration levels of comparable private companies. Overall, executive remuneration of public policy-oriented SOEs additionally includes a variable component amounting up to 20% of the annual salary, whereas it does not include pension payments or shares. By contrast, the variable components of commercially oriented SOEs vary depending on the sector of operation. Pension payments are predominantly included. The performance‑related components mainly consist of a mix of short-term and long-term variable remuneration. |
● ■ |
Belgium |
For the SOEs in the Ministry of Finance’s portfolio (i.e. Skeyes, NMBS/SCNB, Proximus, Bpost), the remuneration of the executive committee and the individual remuneration packages are set by the board of directors upon recommendations from the momination and remuneration committee, and taking into account the remuneration cap on the basic remuneration for the CEO of the SOEs, which amounts to EUR 290 000 a year (gross salary). The individual remuneration packages are defined by the board according to the individual responsibilities, performance and skills of executive managers. |
● ■ |
Brazil |
All executive managers of Brazilian SOEs are appointed on fixed-term contracts. According to the State‑Owned Company Act (13.303/2016), the terms are limited to two years, and renewable three times. Similar to the process for determining the remuneration policy of boards, the remuneration of SOEs’ executive managers is determined by the annual general meeting of the SOE. However, SOE boards participate in this process by constructing the remuneration proposal to be submitted to the Ministry of the Economy, to be further deliberated during the annual general meeting. A “People Committee” was recently established in all SOEs to advise the board on issues related to human resources management, including executive remuneration. |
●2 ■ |
Bulgaria |
The contracts of management and supervisory board members of SOEs are concluded for a period of three to five years. However, in the case of listed SOEs, the contracts with the executive directors are open-ended and are in force until their release. Similar to the process for determining board remuneration, each ministry/holding determines the policies/rules/guidelines of the remuneration of the management and control bodies in public enterprises from its portfolio. In the case of state‑owned enterprises established under Article 62 of the Commercial Act, the calculations themselves are carried out by each public enterprise. In the case of listed SOEs, remuneration is determined by the general meeting of shareholders in accordance with the provisions of the statute of the company and the remuneration policy. |
❍ ■ |
Chile |
Executive managers are appointed on continuous contracts with terms for termination. Boards set the remuneration levels of executive managers, within the limits provided by Circular N°15 of 2018, which states that they must correspond to the remuneration of the first quartile of the market and cannot exceed the remuneration of the President of the Central Bank. |
❍ |
Colombia |
While each SOE sets the contractual relationship with their executive managers, the MHCP has recently opted to promote the adoption of continuous contracts for SOEs operating in the electric power sector, with the rights, obligations and termination characteristics of common full time labor contracts in Colombian law (Codigo Sustantivo del Trabajo). In some financial institutions and other mixed economy entities and companies that carry out an industrial or commercial activity and that are owned by the state, the President of the country appoints a public official as the executive manager of the company. In this case, the company adopts the rights, obligations and termination characteristics for public servants defined by the Administrative Department of the Public Function (Departamento Administrativo de la Función Publica – DAFP) with Decree 1 042 of 1978, Law 4 of 1992 and more recently Decree 304 of 2020. The remuneration levels of executive managers are set at the discretion of the board, and sometimes ratified by the general assembly. However, if the executive manager is designated by the state according to the bylaws of the company, then the executive manager will be compensated according to the salary scale for public servants of the Administrative Department of the Public Function (Departamento Administrativo de la Función Publica – DAFP), which sets monthly remuneration caps defined in articles 1 and 49 of Decree 304 of 2020. While it is not systematic, in some cases, the SOE board sets up a committee for advising on the remuneration of executive managers and senior employees. |
■ |
Costa Rica |
In the majority of SOEs, the CEO is appointed on fixed-term contracts of four to six years, and the rest of the executive managers are appointed on continuous contracts with terms for termination. In only a few SOEs, both the CEO and the rest of the executives are all appointed on fixed-term contracts of four to six years. Remuneration practices for SOE executive managers are established through two different procedures, according to their orientation. For commercially oriented SOEs – including SOEs in the financial, electricity, telecommunications and postal sectors – the board has the ultimate responsibility for establishing remuneration levels of executive managers following private sector benchmarks, within the provisions set by the Law for Strengthening Public Finances. For SOEs where a remuneration committee is established, the remuneration committee is responsible for developing remuneration proposals for the board’s consideration. For public policy-oriented SOEs, executive managers are subject to the public employment scheme, and applicable remuneration levels are therefore defined by the National Budgetary Authority. |
♦ |
Croatia |
All SOEs appoint executive managers on fixed-term contracts of up to four years, although these contracts might occasionally last six months. For all majority-owned SOEs, the salaries of CEOs and members of the management board are mainly determined according to the conditions set out in the 2009 Government “Decision on Determining Salaries and Other Remunerations of Presidents and Members of Management Boards”, which sets a cap on the basic and variable components of executive managers’ compensation. Although the decision is no longer in force, the provisions of the decision have however continued to apply. Overall, a remuneration policy has yet to be developed for members of both supervisory boards and management boards of state‑owned enterprises, which will be the result of joint work between line ministries, MPGI and CERP, as ownership bodies. |
❍ ■ |
Czech Republic |
The remuneration policy is determined by the Remuneration Principles, for which the Ministry of Finance is responsible, while their application to the relevant entities is the responsibility of the line ministries. The principles are observed in all SOEs with the exception of financial institutions which are subject to specific banking regulation (Directive 2013/36 / EU of the European Parliament and of the Council). |
❍ |
Estonia |
The executive managers are typically appointed on fixed-term contracts for a maximum period of five years, subject to termination at any time. The supervisory board is responsible for setting the remuneration of the management board. While monthly remuneration is not regulated, the State Assets Act stipulates that it be kept at reasonable yet competitive level. On the other hand, annual bonuses are capped at four times the average of the monthly salary. |
❍ ■ |
Finland |
Executive managers are appointed on continuous contracts with terms for termination. The board of directors decides on the managers’ remuneration, which is expected to be in line with market levels. In addition, the government publishes the political guidelines on bonus levels for SOEs, which sets clear limits for the bonuses. The maximum percentage of acceptable variable remuneration varies according to company category and the categories used in this context are a) listed or major commercial companies, b) small and medium sized commercial companies, and c) special assignment companies. |
● |
France |
Executive managers are appointed on fixed-term contracts. The procedure for determining the remuneration of executive managers is similar to the one in place in private companies, as it is submitted by the board – upon recommendations of the remuneration committee – to the general meeting of the companies which approves them (or not). It is capped at EUR 450 000 per year. |
● ■ |
Germany |
Executive remuneration is set either by the board or the AGM depending on the SOE’s corporate form, total number of employees, and its Charter or Articles of Association. Executive managers are appointed on fixed-term contracts for five years (and three years for the first term). |
■ |
Greece |
The chair, vice chair and executive director of SOEs falling under the scope of Law 3429/2005 are appointed for a three‑year term with the possibility of renewal for another three years. A special committee interviews the candidates and selects the most suitable for the position (according to articles 20‑23 L.4735/20). Board members of SOEs which are exempted from this law are elected by the shareholders’ general meeting and are appointed on fixed-term contracts according to each SOE’s statute or founding law. Similar to the process applicable to boards, remuneration of executive managers is either determined by Law 4354/2015, which sets the wage grid for the public sector including SOEs, or by the AGM (for listed SOEs), in which case HCAP’s candidates committee submits its recommendation to the board of HCAP. |
●3 ■ |
Hungary |
Executive managers are appointed on continuous contracts with terms for termination. Boards define the remuneration policies at their own discretion, using the non-binding remuneration guideline for SOEs prepared by NVTNM according to the rules of Act 122 of 2009 on the more efficient operation of SOEs. The involvement of remuneration committees is at the discretion of each SOE, as they are not mandatory for SOEs (only audit committees are). While performance‑related compensation is not granted to executive managers, they may receive a premium of up to 20% of their annual basic salary if a company’s after-tax profit is positive. It may be higher in justified cases. |
|
Iceland |
Executive managers are usually appointed on continuous contracts with terms for termination, like in the private sector. Boards are responsible for evaluating and deciding on the remuneration of their CEOs, in line with the remuneration guidelines established by the Ministry of Finance and Economic Affairs in the state general ownership policy, which posits that the remuneration of SOE executive managers should be competitive but not market leading. Although executive managers do not receive performance‑related compensation, they receive benefits (i.e. car benefits in most cases) in addition to their annual salary. |
|
Ireland |
CEOs are typically hired on fixed-term contracts, while other senior executive are hired on continuous contracts. According to the Code of Practice, the contract terms of a CEO of a commercial state body is limited to a non-renewable contract of five to seven years, while CEOs of non-commercial state bodies are appointment for a term of five years, unless otherwise provided for in the body’s establishing legislation. Regarding commercial state bodies, in 2011, the government introduced revised salary ranges for new appointments to CEO posts, representing reductions of up to 25%. To date, salaries remain aligned with these ranges, and any variations have been established on a case‑by-case basis as agreed with the relevant government departments and relevant ministers, and the SOE. Regarding posts in non-commercial state bodies, salaries were reduced by Financial Emergency legislation in the period 2010 to 2013. Restoration of these reductions commenced in 2017. In general, salaries remain at or below the rates that pertained prior to 2010. Performance‑related awards (PRAs) granted to CEOs of both commercial and non-commercial state bodies were suspended in 2009 in the context of the global economic downturn, and have not been reintroduced since. For executive managers below CEO level in commercial state bodies, this is a matter for the remuneration committee as appointed by the board. |
♦4 |
Israel |
official guidelines for the remuneration of executive managers were issued in 2015, which provide that executive managers’ contracts be limited to five years with the possibility of an extension of up to two years according to a board decision, to be extended by another year with the approval of the Government Companies Authority (GCA). The remuneration of the CEO is determined by virtue of a government decision, in accordance with the circular of the GCA. The salary is linked to the consumer price index or the average wages of production workers. Remuneration policies are set by the Government Companies Authority (GCA) in co‑operation with the Wages and Labour Agreements Division, which are two units under the Ministry of Finance. While in practice, the board sets the remuneration levels according to the framework provided by the GCA, any deviations from the framework is based on the approval of the GCA. The board is responsible for approving promotions, and also plays a role in setting performance‑based compensation and in conducting performance evaluations. |
❍ ■ |
Japan |
Similar to the procedure in place for determining the remuneration of board members, the maximum remuneration of executive managers is approved at the Annual General Meeting based on recommendations of the Advisory Panel on Nomination and Compensation for SOEs with such committees in place (otherwise it is based on a proposal submitted by the Board). The remuneration of individual executives is determined by the board of directors within the range of the total approved amount. |
● ■ |
Korea |
Executive managers (or executive officials) of SOEs include the institution’s head (the CEO), board of directors (executive and non-executive) and auditors (executive and non-executive). They are in a contractual relationship with the SOE boards, the Committee for Recommendation of Executive Officers, the line ministry, and the Ministry of Economy and Finance. They are appointed on fixed-term contracts, the institution head (the CEO)’s term being three years, and the directors and auditors being two years. An executive officer of a public corporation and quasi-governmental institution may be consecutively appointed for one‑year terms. All executive managers of every public institution in Korea are subject to the same, basic contractual standards under the Act on the Management of Public Institutions, so there is no difference across SOEs. According to Article 33 of the Act on the Management of Public Institutions and Article 5 of the attached Guidelines for Remuneration for Executive Officers of Public Corporations and Quasi-governmental institutions, the guidelines for remuneration of executive officers of a public corporation or quasi-governmental institution shall be determined by the board of directors in accordance with the guidelines for remuneration determined by the Minister of Strategy and Finance through the deliberation and resolution by the Steering Committee. Further, according to Article 4 of the Guidelines, the basic annual salary of the head of the corporation shall be determined annually in connection with the annual salary of the vice minister among public officials in political service. The annual salary of vice ministers are determined each year by the Ministry of Personnel Management (MPM) at the state council, based on the Public Officials Remuneration Regulations and Regulations on Allowances for Public Officials. For reference, as of 2021, the Vice Minister’s annual salary was set at roughly 132 million won. In addition, the basic annual salary of a standing auditor and a standing director shall be equal to 80% of the basic annual salary of the CEO. This cap applies to both the basic annual salary and management performance bonuses. While board committees can be involved in determining the remuneration levels of executive managers, this depends on whether they are set up, as they are not mandatory in SOEs. |
● ■ |
Latvia |
Members of the management board in SOEs are appointed for a fixed five‑year term, renewable once upon the decision of the ownership entity or supervisory board. In cases where it is not possible to complete the nomination procedure of the management board member within a term that would ensure the operational capacity of the SOE, a member of the management board may be appointed on a temporary basis (not exceeding one year). The boards set the remuneration of executive managers, within the limits provided by law as well as the central ownership agency’s guidelines explaining the application of remuneration principles in practice. In particular, the remuneration of the CEO of a small SOE may not exceed five times the average statistical salary of the previous year, while the CEO of a medium-sized SOE may not exceed it by eight times, and of a large SOE, by 10 times. The remuneration levels of the members of the executive boards are capped by 90% of the remuneration of the CEO. Overall, the ownership entity (or supervisory board) should ensure that increases in monthly remuneration amounts do not exceed 25% of the amount reported during the previous year. |
5 ■ |
Lithuania |
CEOs of SOEs are hired for a five‑year term, renewable once, provided that all operational objectives of the SOEs are achieved. The policy of the remuneration of senior executives of SOEs is regulated by Resolution No 1 341 of the Government of the Republic of Lithuania of 23 August 2002.The Remuneration Resolution regulates only the remuneration of CEOs and deputy directors of statutory enterprises (including 17 SOEs). For state‑owned limited liability companies (including 32 SOEs), the provisions of the Remuneration Resolution are only recommended in principle, but widely followed in practice. For statutory SOEs, the actual salary of executive managers is set by the ownership entity (usually the line ministry), within the range set by law. Line ministries also decide on the variable remuneration component of executive managers, respecting the established limits set by law. Boards of limited liability SOEs have much more flexibility to set the remuneration amounts for the executives, as the ownership entity can decide not to comply with the provisions of the Remuneration Resolution. Although remuneration committees can play a role in recommending remuneration policies as well as in monitoring their implementation, they are not widely established in SOEs (only three boards have set up such committees). |
6 ■ |
Mexico |
Executive managers of PEMEX are hired on fixed-term contracts, while for CFE, executive managers are public servants appointed on continuous contracts. In the case of PEMEX, the Human Resources and Remuneration Committee is responsible for proposing to the board of directors the remuneration mechanism for the CEO and the executives standing three hierarchical levels below him/her. The CEO remuneration is capped at the amount equivalent to the remuneration of a Secretary of State (MXN 158 270 [Mexican Pesos], monthly). In the case of CFE, according to its statutory law (CFE Law), the Human Resources and Remuneration Committee proposes to the board of directors the remuneration mechanism for the CEO and executive managers three hierarchical levels below him/her, within the limits provided by the approved budget and without exceeding the budget ceiling for Chapter 1 000 “Personal Services” of the Classifier by Object of Expenditure. |
● ♦7 |
Netherlands |
Executive managers of all SOEs are appointed on fixed-term contracts. According to the Government’s SOE board remuneration policy, the maximum remuneration amount for executive managers of individual SOEs is decided by the general meeting of shareholders, using as a reference the Top Income Standard Law (de Wet Normering Topinkomens) for public policy-oriented SOEs, and the median of a private peer group of similar companies for commercially oriented SOEs. Once the limits have been set, the supervisory board decides on the actual remuneration levels of the members of the executive board. |
■ |
New Zealand |
Chief executives are usually appointed by boards on continuous employment contracts, although this is at the discretion of boards. For commercial SOEs, CEO remuneration is determined by each company’s board, which are generally expected to use benchmarks of similar sized companies operating in similar industries. For public policy-oriented companies, the State Services Commissioner provides recommendations to the boards of statutory crown entities on chief executive remuneration. However, as the employer of chief executives, boards are ultimately responsible for agreeing the terms and conditions with their chief executives. The Public Service Commission publishes Public Sector Senior Pay in a compiled report from time to time, which can also be used as a benchmarking tool for commercial SOEs. Overall, the more profit-oriented the company, the more likely the board will use private sector benchmarks. |
● |
Norway |
Executive managers are appointed on continuous contracts with terms for termination. The Norwegian state’s guidelines for remuneration of senior executives in companies with state ownership, established by the Ministry of Trade, Industry and Fisheries, outline expectations for remuneration of the executive management in SOEs. The board is required to produce guidelines for executive remuneration, as mandated by law for listed public limited liability companies, and by the companies’ articles of association for all other non-small SOEs. The guidelines shall be approved by the general meeting and will be binding on the board’s actual implementation of the remuneration policy. While the board is responsible for setting the remuneration of the CEO (within the board’s guidelines), the CEO is responsible for setting the remuneration of the rest of the executive managers (within the board’s guidelines). Many SOE boards have compensation committees which provide recommendations to the board regarding the remuneration levels of executive managers. There are no remuneration caps or limits regarding fixed compensation levels, although the state expects the remuneration to be competitive but not market leading, and that the boards take moderation into account when setting the remuneration. However, boards should respect limits related to pensions, severance pay (amounting to six months’ salary plus the salary in the resignation period), and performance‑based pay. |
● |
Philippines |
The CEO or the highest-ranking officer provided in the charters of the SOEs shall be elected annually by the members of the board from among its ranks. The CEO shall be subject to the disciplinary powers of the board and may be removed by the board for cause. Notably, the term of office of a CEO appointed to the board is for one year, unless sooner removed for cause, in which case he/she shall continue to hold office until the successor is appointed. The remuneration of executive managers is set by the compensation and position classification system for SOEs, following the principles set under Section 9 of R.A. No. 10149. As such, the state ownership agency (GCG) establishes and/or recommends to the Office of the President of the Philippines, as may be required or needed, the remuneration policies covering SOEs. Such policies may be co‑ordinated with key government agencies such as the Department of Budget and Management, and the Department of Finance. Overall, the remuneration levels of executive managers of SOEs are either fixed by law or approved by the President of the Philippines. In particular, for SOEs that follow the Salary Standardization Law (SSL), their compensation is provided by E.O. No. 36, s. 2017 and its implementing rules and regulations (IRR) under GCG M.C. No. 2017‑03. On the other hand, for SOEs that are applying a compensation framework that is different from the SSL, their remuneration must bear the necessary approval from the Office of the President of the Philippines, as provided under Joint Resolution (J.R.) No. 4 s. 2009, Section 5 of Presidential Decree (P.D.) No. 1597, s. 1978, Section 9 of E.O. No. 7, s. 2010 and R.A. No. 10149. |
❍ ■ |
Portugal |
According to Article 13 of Decree‑Law No. 71/2007 of 27 March, executive managers are designated by means of appointment or election. If the designation is made by appointment, it is carried out by a Council of Ministers Resolution published in the Official Gazette. Executive managers’ positions are held, as a rule, for a three‑year period that shall not be renewed more than three times. Similar to the remuneration of board members, the government also establishes the remuneration policies for executive managers. These are set according to Resolution of the Council of Ministers No. 16/2012 of 14 February 2012, which classifies SOEs into three groups (A, B and C) based on the application of the following indicators: i) contribution of the public financial effort to the operating result; ii) number of employees; iii) net assets; iv) turnover. Overall, the monthly compensation of executive manager cannot exceed the Prime Minister’s compensation. |
❍ ■ |
Slovak Republic |
In most of the SOEs, CEOs conclude the mandate contract according to the Slovak Commercial Code, while the CFOs, COOs and other executive managers work under terms of the Slovak Labour Code. The tenure of a CEO is usually set to five years and may be terminated by her/his resignation or completion of the five‑year term. The tenure of the other executive managers depends on the conditions in their labour contracts, which are mostly concluded for an indefinite period of time with terms for termination. The remuneration of executive managers is decided at the AGM based on a proposal submitted by the supervisory board, taking into account the provisions of relevant rules and regulations for wholly owned SOEs and for state enterprises. For 100%-owned SOEs, the Resolution of the Slovak Government No. 159/2011 provides that the remuneration of the members of the management board consist of three components: i) a fixed component set as a 1.5‑2 multiple of the average nominal wage, based on data provided by the Statistical Office of the Slovak Republic; ii) a component of economic nature reflecting the size of the SOE and its role within the economy (e.g. return on investment, etc.); and iii) a variable component capped at 50% of the amount of the first two components. For state enterprises, according to the Act No. 111/1990 Coll. on State Enterprise, the monthly salary of the CEO of a state enterprise cannot exceed eight times the average wage in the national economy of the previous year, and the annual remuneration (share on profit/royalties) cannot exceed 10% of the disposal profit of the enterprise. |
❍ ♦ |
Sweden |
Executive managers are usually appointed on continuous contracts with terms for termination. According to the State Ownership Policy and principles for state‑owned enterprises, the total remuneration paid to senior officers is to be competitive, but not market leading. The board sets the remuneration level of the CEO at its full discretion, based on a proposal formulated by the remuneration committee following a benchmarking exercise. The board also has full discretion to set the remuneration levels of the other members of the management board, although it is based on a proposal submitted by the CEO. Likewise, the board evaluates the CEO performance, and the CEO evaluate the performance of members of the management board, which are used to determine the actual salary change. Executive managers do not receive performance‑related compensation. However, in addition to their fixed, cash-based salary, they receive severance pay, pension benefits and other benefits (such as a company car). |
● |
Switzerland |
The contractual relationship of executive managers with the company is in most cases an employment contract based on the Swiss Code of Obligations. Therefore, both fixed-term contracts as well as continuous contracts with terms for termination are possible. Similar to the process for determining board remuneration, executive remuneration is determined by the company based on relevant rules and regulations. For companies limited by shares, the annual general meeting has the power to determine annually i) a ceiling for the total amount of the fees of the board members and its chair (separately) and ii) to set an upper limit for the total amount of the remuneration of the executive board. |
● ♦ |
Turkey |
According to Decree Law No. 233, the members of the SOE board of directors are appointed by the President to serve for three years. It should be noted that the remuneration is the same for executive and non-executive members, as the upper remuneration limit for each SOE is determined by presidential decision, which was drafted by the Ministry of Treasury and Finance, taking into consideration inputs from the relevant Ministries and the Presidency. While the remuneration of specific SOEs can be up to 45% higher than in other SOEs, the number of these “privileged” SOEs is small. Overall, two monthly benefits are granted to executive managers annually – albeit not related to performance – in addition to the fixed fees received over 12 months. |
❍ ■ |
United Kingdom |
Executive managers are usually appointed on open-ended contracts. Remuneration for SOEs is set in the same way that private companies set their remuneration. The process is led by the Remuneration Committee, which will often engage external remuneration consultants to help devise packages and benchmark against comparators. Based on the Remuneration Committee’s recommendation, the board sets remuneration levels at its own discretion, within the broad rules established by government regarding spending public money as set out in Managing Public Money and the Guidance for the Approval of Senior Pay. These policies are set by HM Treasury and apply across all government departments, and provide that all remuneration must be cash-based and that few allowances/benefits are allowed. For the CEO or CFO (and in some cases other employees), all packages above GBP 150k must be approved by ministers. |
● |
Notes: Data unavailable for Peru and Spain. On role of board committees in setting remuneration levels:● = yes; ❍ = no; = ad-hoc basis. On contractual relationships of executive managers: ■ = fixed-term contracts; = open-ended contracts; ♦ = both possible.
1 In Australia, although board committees do not play a role, boards are consulted on an annual basis.
2 In Brazil, a “People Committee” was recently established in all SOEs to advise the board on human resources management issues, including executive remuneration.
3 In Greece, the remuneration committee plays a role in listed SOEs only.
4 In Ireland, the remuneration committee plays a role with regard to the remuneration of executive managers below CEO level in commercial state bodies only. In addition, while CEOs are hired on fixed-term contracts, other executive managers are usually hired on continuous contracts with terms for termination.
5 In Latvia, the role of the remuneration committee is mandatory for listed SOEs, but is not widespread practice for other SOEs.
6 In Lithuania, only three SOE boards have a remuneration committee.
7 In Mexico, fixed-term for PEMEC, open-ended for civil servants as executive manager (CFE).
Source: Author, based on questionnaire responses and desk research.
3.4. Transparency and disclosure practices
On the issue of transparency and disclosure, the SOE Guidelines observe that “[i]t is important that SOEs ensure high levels of transparency regarding the remuneration of board members and key executives. Failure to provide adequate information to the public could result in negative perceptions and fuel risks of a backlash against the ownership entity and individual SOEs. Information should relate to actual remuneration levels and the policies that underpin them” (annotations to Chapter VI, Point A). It indicates that it is considered in the interest of ownership entities to opt for maximum transparency, even at the risk of spurring public anger by disclosing pay levels that may be considered as excessive.
3.4.1. Disclosure practices by SOEs
In all but two countries (Turkey and Colombia)3, SOEs are required to disclose information on the remuneration levels of executive managers to the general public. In many countries, SOEs also disclose the remuneration policy applicable to executive managers, including some details of the bonus schemes and key performance indicators underpinning the calculation of the variable remuneration amount (e.g. Australia, Belgium, United Kingdom). In Latvia, while SOEs were previously only required to publish the principles of their remuneration policy, since January 2020, majority-owned SOEs are required to disclose remuneration levels of individual executive managers.
In some countries, different requirements apply depending on the legal form, share of state ownership, orientation and size of the company. For instance, in the Czech Republic, granular information on the remuneration of each executive manager is required to be disclosed by listed SOEs only, while non-listed SOEs are only required to disclose general information in their annual reports. In Israel, only listed and “non-profit” companies are required to disclose this information. In the Netherlands, while the Dutch Corporate Governance Code is only mandatory for listed companies, and prescribes that the remuneration of executive managers be published on the SOE’s websites, all SOEs comply. In Croatia, similar to provisions applicable to supervisory boards, listed SOEs are required to disclose the remuneration of individual executive managers and of the entire management board, in addition to the remuneration policy. Unlisted SOEs have not such obligation.
In New Zealand, while there are no legally binding disclosure requirements for SOEs, since 2019, the government expects commercially oriented SOEs to disclose the remuneration of the CEO and CFO, in an effort to align SOE practices with the provisions applicable to listed companies. In addition, according to Section 211 (1)(g) of the Companies Act 1993, all SOEs and listed companies are legally required to publicly disclose the number of employees which are paid more than NZD 100 000 (New Zealand dollars). Likewise, In the United Kingdom, while SOEs are required to disclose information on executives in their annual report, for those not classified as “public corporations” there is also a requirement to disclose the base remuneration of all employees earning a base salary of more than GBP 150k.
In Ireland, the Code of Practice for the Governance of State Bodies sets out that commercial state bodies, in addition to disclosing the aggregate pay bill and total number of employees, should publish details on the number of employees whose total employee benefits (excluding employer pension costs) for the reporting period fell within each band of EUR 25 000 from EUR 50 000 upwards and an overall figure for total employer pension contributions in their annual report and/or financial statements.
This information is most often required to be disclosed by SOEs in their annual reports or on their websites, but in some countries, a separate remuneration report is required. For instance, in Belgium, the remuneration committee is required by law to produce a report on the remuneration of the members of the executive committee, which is included in the annual report. In Sweden, SOEs have to prepare a remuneration report, like listed limited liability companies as per the Companies Act and Annual Accounts Act, disclosing the remuneration of executive managers and accounting how the government’s principles for remuneration and other terms of employment have been applied. A similar requirement to prepare a remuneration report has been imposed on non-small SOEs in Norway effective from 2023. Further, according to the Accounting Act, all companies that are not small shall report the aggregate salary provided to the CEO.
While SOEs are only required to disclose the remuneration of the CEO in some countries (Iceland, Lithuania), in other countries, disclosure is divided between CEO remuneration and remuneration of the rest of the management team on an aggregate basis (Australia, Belgium, Finland). In some countries, some SOEs also disclose disaggregated information on the fixed and variable remuneration components, and the weight of each part in the overall pay packages of the CEO and other executive managers (Estonia, Belgium).
Box 3.2. Example of granular disclosure on executive remuneration by a Belgium SOE (Proximus)
In its integrated annual report, Proximus provides a general overview of the remuneration allocated to the members of the Executive Committee over the last five years, with disaggregated information on each remuneration component, split between pay packages of the CEO and the other members of the Executive Committee.
Table 3.4. Remuneration overview of the CEO
CEO |
2016 |
2017 |
2018 |
2019 |
2020 |
---|---|---|---|---|---|
Fixed remuneration |
EUR 505.005 |
EUR 515.108 |
EUR 522.810 |
EUR 429.498 |
EUR 507.492 |
Short-term variable remuneration |
EUR 178.875 |
EUR 227.195 |
EUR 225.295 |
EUR 215.661 |
EUR 458.833 |
Long-term variable remuneration |
EUR 0 |
EUR 0 |
EUR 0 |
EUR 0 |
EUR 18.833 |
Group insurance premiums |
EUR 169.666 |
EUR 181.243 |
EUR 180.003 |
EUR 157.433 |
EUR 78.550 |
Other benefits |
EUR 12.463 |
EUR 13.357 |
EUR 12.438 |
EUR 17.619 |
EUR 55.083 |
Subtotal (excl. employer’s social contributions) |
EUR 866.009 |
EUR 936.903 |
EUR 940.546 |
EUR 820.211 |
EUR 1.118.791 |
Termination benefits |
EUR 0 |
EUR 0 |
EUR 0 |
EUR 0 |
EUR 0 |
Total (excl. employer’s social contributions) |
EUR 866.009 |
EUR 936.903 |
EUR 940.546 |
EUR 820.211 |
EUR 1.118.791 |
Source: Proximus Group (2020), Integrated Annual Report 2020, https://www.proximus.com/annualreport2020.html.
Table 3.5. Remuneration overview of the other members of the Executive Committee
Other members of the Executive Committee |
2016 |
2017 |
2018 |
2019 |
2020 |
---|---|---|---|---|---|
Fixed remuneration |
EUR 2.497.345 |
EUR 2.253.540 |
EUR 2.466.946 |
EUR 2.632.038 |
EUR 2.166.045 |
Short-term variable remuneration |
EUR 1.583.327 |
EUR 1.105.537 |
EUR 1.110.745 |
EUR 1.070.733 |
EUR 1.807.390 |
Long-term variable remuneration |
EUR 982.000 |
EUR 1.005.000 |
EUR 1.025.000 |
EUR 1.055.000 |
EUR 916.375 |
Group insurance premiums |
EUR 919.496 |
EUR 516.193 |
EUR 494.319 |
EUR 529.369 |
EUR 468.275 |
Other benefits |
EUR 107.605 |
EUR 108.433 |
EUR 124.172 |
EUR 145.588 |
EUR 135.648 |
Subtotal (excl. employer’s social contributions) |
EUR 6.098.773 |
EUR 4.988.703 |
EUR 5.221.182 |
EUR 5.432.728 |
EUR 5.493.733 |
Termination benefits |
EUR 0 |
EUR 0 |
EUR 0 |
EUR 0 |
EUR 0 |
Total (excl. employer’s social contributions) |
EUR 6.089.773 |
EUR 4.988.703 |
EUR 5.221.182 |
EUR 5.432.728 |
EUR 5.493.733 |
Source: Proximus Group (2020), Integrated Annual Report 2020, https://www.proximus.com/annualreport2020.html.
Proximus also discloses the weight of each remuneration component in the overall pay packages of the CEO and rest of the executive committee in a given year.
Figure 3.5. Relative importance of the various components of the remuneration effectively allocated in 2020 before employer’s social contribution
![](/adobe/dynamicmedia/deliver/dm-aid--fdb034f9-0b28-4c40-97b3-e0780234ede8/image6.png?preferwebp=true&quality=80)
Source: Proximus Group (2020), Integrated Annual Report 2020, https://www.proximus.com/annualreport2020.html.
In Colombia, while SOEs are not required to disclose information on the remuneration levels or policy, SOEs are encouraged by the ownership entity to disclose this information, especially for companies where the President appoints a public official as executive manager. In the Slovak Republic, only joint stock companies and state enterprises are required to disclose remuneration information on an aggregate basis. While the law provides for levels to be disclosed upon request, it is reported that in practice, SOEs rarely comply.
3.4.2. Disclosure practices by the state or ownership entity
In almost half of the surveyed countries with available information (15 out of 33), the state or ownership entity does not disclose information on the remuneration of executive managers, mainly because SOEs are already required to do so in their annual reports or on their websites (e.g. Austria, Belgium, Chile, Estonia, Finland, Japan, New Zealand), or because remuneration caps are set by law which is itself publicly available (e.g. Turkey). This may also be because in these countries, setting the remuneration of executive managers is the responsibility of the board and not the state.
In some of these countries, while executive remuneration is not disclosed on a systematic basis, SOEs are legally required to disclose the monthly remuneration of public officials appointed by the government as executive managers in SOEs (Colombia, Latvia). In Costa Rica, similar to boards, while information on remuneration is not actively disclosed by the ownership entity, the Presidential Advisory Unit on State Ownership does disclose whether specific SOEs are complying with their responsibility to publish the required board and management remuneration information, as part of the analysis included in the annual Aggregate Report on SOEs.
Out of the 16 countries where the government discloses granular information on remuneration of executive managers, in some instances this is mainly done through a central government portal aggregating all SOE websites, making this information easily accessible to the public (Australia, Korea, Portugal). In France, the Netherlands, Norway and Switzerland, information on executive remuneration is disclosed in the government or ownership entity’s annual report on SOEs, or by the Commission on Audit in the Philippines. In the United Kingdom, the state collates and discloses the salary of all employees who earn more than GBP 150k except those employed by ‘public corporations’.
In some countries, disclosure is limited to the remuneration of the CEO only (Iceland, Lithuania, Norway), or to the remuneration of executive managers of large SOEs only (Bulgaria). In Lithuania, since 2018 the Governance Co‑ordination Centre publishes detailed analysis on CEO remuneration, both disclosing the total amount and composition of the remuneration for each SOE in its portfolio.
Figure 3.6. Disclosure of remuneration levels of executive managers by the government or ownership entity
![](/adobe/dynamicmedia/deliver/dm-aid--c0edf095-3985-40f6-9ac8-66681a466a8a/image7.png?preferwebp=true&quality=80)
Note: Data unavailable for Ireland, Peru and Spain.
Source: Author, based on an analysis of questionnaire responses and desk research.
References
[3] European Commission (2016), State-Owned Enterprises in the EU: Lessons Learnt and Ways Forward in a Post-Crisis Context, https://ec.europa.eu/info/publications/economy-finance/state-owned-enterprises-eu-lessons-learnt-and-ways-forward-post-crisis-context_en.
[11] IBP (2014), Transparency of State-Owned Enterprises in South Korea, https://www.internationalbudget.org/wp-content/uploads/Hidden-Corners-South-Korea.pdf.
[4] IDB (2016), State-owned enterprise management: advantages of centralized models, https://publications.iadb.org/publications/english/document/State-owned-Enterprise-Management-Advantages-of-Centralized-Models.pdf.
[5] Keppeler, F. and U. Papenfuß (2021), Understanding vertical pay dispersion in the public sectir: the role of publicness for manager-to-worker pay ratios and interdisciplinary agenda for future research, Public Management Review, https://doi.org/10.1080/14719037.2021.1942531.
[8] OECD (2022), Monitoring the Performance of State-Owned Enterprises: Good Practice Guide for Annual Aggregate Reporting, https://www.oecd.org/corporate/ca/Monitoring-performance-state-owned-enterprises-good-practice-guide-annual-aggregate-reporting-2022.pdf.
[7] OECD (2021), Ownership and Governance of State-Owned Enterprises: A Compendium of National Practices, https://www.oecd.org/corporate/ownership-and-governance-of-state-owned-enterprises-a-compendium-of-national-practices.htm.
[12] OECD (2020), Implementing the OECD Guidelines on Corporate Governance of State-Owned Enterprises: Review of Recent Developments, OECD Publishing, Paris, https://doi.org/10.1787/4caa0c3b-en.
[9] OECD (2020), Transparency and Disclosure Practices of State-Owned Enterprises and their Owners, OECD Publishing, Paris, http://www.oecd.org/corporate/transparency-disclosure-practices-soes.
[10] OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, https://www.oecd.org/corporate/guidelines-corporate-governance-soes.htm.
[6] OECD (2011), Corporate Governance of State-Owned Enterprises: Change and Reform in OECD Countries since 2005, OECD Publishing, Paris, https://doi.org/10.1787/9789264119529-en.
[2] Proximus Group (2020), Integrated Annual Report 2020, https://www.proximus.com/annualreport2020.html.
[1] Swedish Government (2021), Annual report for state-owned enterprises 2020, https://www.government.se/4a8002/contentassets/cfc739c587744fefa6e117e0f20ae788/annual-report-for-state-owned-enterprises-2020-complete.pdf.
Notes
← 1. In Norway, it is worth noting that since 2022, most SOE boards are required to prepare a remuneration policy to be approved by the general meeting, and the remuneration of the CEO and other executive managers must be set within such policy. The remuneration policy will not include limits for the overall remuneration levels.
← 2. See for instance: 16.438 Entreprises fédérales et entreprises liées à la Confédération. Pour des rétributions appropriées et pour la fin des salaires excessifs ; 16.3377 Un plafond des salaires à 500000 francs.
← 3. The absence of such requirements in Turkey can be explained by the fact that this information is already publicly available as the limits are set by law. Likewise, in Colombia, when public officials serve as executives their remunerations are publicly disclosed.