Execs' earnings to be capped in bailouts

The Government aims to cap salaries and bonuses paid to executives of companies that are bailed out by the taxpayer. 

Economic Development Minister Ebrahim Patel said R1 billion had been set aside by the Industrial Development Corporation to assist companies in distress as a result of the recession.

A number of conditions would be attached to the money, including guidelines on how much to pay executives.  Taxpayers’ money could not be used for “inappropriate” executive packages, he told journalists at Parliament yesterday. 

“Obviously for government it’s a sensitive matter, this is public money, it’s taxpayers’ money and therefore it has got to be used wisely, and we need to be able to show that it’s being used appropriately and therefore it cannot be a source for financing inappropriate executive pay.” 

Patel said companies that approached the government for help would have their books scrutinised to determine their performance in relation to what top managers were paid. 

“In a particular company if we can see that there is no relationship between executive remuneration and the underlying performance of the company, then that becomes a formal topic for the discussion between the company and government,” he said. 

The size of the company, the number of managers needed to run it and what it produced would all be taken into account so that a viable business plan could be drawn up, including the amounts executives should be paid. Patel said companies receiving government bailouts would be tied to other commitments, such as how many jobs they could create and save.

They would also be encouraged to use local suppliers as far as possible and be encouraged to talk to unions about how to improve performance. He said the development corporation was dishing out R1bn in loans to a number of companies in distress and that 7 700 jobs had been saved. 

“Our hope is to try and see how we can improve that,” he said.  Patel added that the training layoff programme for workers facing retrenchment had been taken up by about 2 700 people.  “Our challenge is to scale that up very significantly. Because even though we are having the first signs of economic recovery, employment recovery internationally lags behind economic recovery,” Patel said.

Source: www.pretorianews.co.za, 20100303

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