Current Affairs Government imposes pay and rewards framework on top state bosses
The Czech government has come to grips with the so-called fat cat wages and golden handshakes enjoyed by managers of some state companies. It will put into effect a new framework making performance a much bigger factor in pay packets and capping redundancy payments for managers moving on.
The caretaker government of Prime Minister Jan Fischer on Monday approved a new framework for fixing the pay and redundancy payments of top managers in state companies.
The move follows outcry last autumn when it was revealed that the
departing boss of the state carrier Czech Airlines was in line to get a
redundancy payment of 120 million crowns, or around 6.4 million US dollars.
The airline at the time was facing a cash crisis.
Protests have also been sparked by the share option schemes that were a guarantee of getting rich quick for managers at state power giant ČEZ, the generous rewards for the mostly political appointees to company supervisory boards, and the half a million crown monthly pay packets of the likes of the top bosses of ČEZ and Czech Railways.
The Ministry of Finance has pushed through a new framework to create some order. This includes comparing the pay packets of state managers with those in the private sector or where appropriate with similar companies abroad. At least half of managers’ final pay packets should in future be related to their companies performance and checks will be carried out on payments to supervisory board members.
And golden handshakes, or golden parachutes as they are known in Czech, will be curbed at a maximum six times the average monthly wage.
The ministry insists that the drive is not aimed at cutting wages but at getting a better grip of what is being paid out and why.
Jan Preclík of the Czech Management Association says the government could have gone farther.
“Overall, the government’s decision is correct, although it should
have been taken before — but better late than never. The opinion of most
of those in the Czech Management Association or grouped within it is that
the steps should have been more drastic and more consistent.”
And Mr. Preclík adds that there are fundamental differences between bosses in the private and state sectors which even concepts such as performance related pay cannot iron out.
“There is a big difference between private managers, those who are directing a company in which they have a stake or are the 100 percent shareholders. They bear a much greater responsibility because in the worst case scenario they will lose everything, the company and their property. Those in state firms can leave to go somewhere else and if they are members of a winning political party they will get another position. It is all the same to them what they leave behind and where they get their pay packet.”
Contracts with bosses of around 25 state firms should be renegotiated and the new rules take effect by the end of June.
