The Government has finally decided to accept the inevitable and give the go ahead for the chief executives of commercial state companies to be rewarded on a par with their private sector counterparts. This course of action was recommended two and a half years ago by a committee chaired by banker Mr Michael Buckley, which the Government had asked to advise on the issue. A follow up study by Hay Consultants identified the approximate salaries which the executives might earn in comparable private sector companies. After dithering at length of the issue, the Government has finally decided to accept the Buckley recommendations.
The delay in moving on the issue appears to reflect a fear that the decision to pay large salaries to a small group of people would be politically unpopular. Chief executives of large private sector enterprises can earn £150,000 to £200,000 a year - and many earn substantially more through shares options and bonuses. These are the type of packages which will now be made available to the chief executives of the bigger commercial state companies - those in some of the smaller companies are likely to receive somewhat less.
The absurdity of the situation before last week's Government decision is underlined by the fact that a number of the chief executives of the 20 commercial state companies are already earning private-sector style salaries under special contract arrangements. Those who were not were frequently forced to pay their subordinates higher salaries than they themselves earned, in order to attract talented senior management. Now the semi-state boards will negotiate packages with their chief executives and the outcome will in turn go to their parent department and to the Department of Finance for approval.
If the new system is to work properly, then the chief executives involved must be seen to earn their money. The decision that they should be on rolling contracts, which are regularly reviewed, is correct. Clear and challenging targets for bonus payments must be set. And the flip side of attractive rewards is that chief executives who do not perform must be removed.
The decision on pay again raises the issue of the make-up of semi-state boards. By giving them more responsibility to negotiate and set chief executive pay, the Government is adding another layer of responsibility to semi-state boards, particularly to the role of chairman. This Government has been inconsistent in its treatment of state boards. It went to great lengths, for example, to restructure the Telecom Eireann board and put in place people with relevant experience. Yet in other cases appointments made have been clearly political. It is time to adopt a more consistent approach to appointing people with the necessary expertise; state company board seats should not be divided out as rewards for political friends.