Ghana’s oversight authority has endorsed linking executive compensation at state-owned enterprises to profitability and dividend payments, marking a significant shift toward performance-driven governance across the country’s public sector companies.
The State Interests and Governance Authority launched its 2024 State Ownership Report, calling for an end to traditional compensation structures that have failed to incentivize efficiency at enterprises ranging from power utilities to transport companies. The authority argues that tying executive rewards to measurable financial outcomes represents the most effective path toward operational transformation.
Corporate governance experts have long advocated for such reforms, with practitioners like Dr. Kwabena Donkor consistently arguing that leadership must have financial stakes in their companies’ success. This approach aims to create accountability mechanisms that align executive interests with taxpayer expectations for profitable state enterprises.
SIGA’s position reflects growing frustration with persistent underperformance across Ghana’s state enterprise sector. The authority believes that linking compensation to dividend outcomes will motivate executives and employees to prioritize innovation, eliminate waste, and deliver tangible value to shareholders.
Despite recording strong revenue growth of 28.3 percent in 2024, many state enterprises continue struggling with operational efficiency challenges that drain public resources. The compensation reform represents part of broader efforts to address these systemic issues through governance improvements.
The oversight body emphasized that performance-driven culture must extend beyond executive suites to encompass entire organizational structures. When leadership compensation depends on dividend payments, the authority expects increased focus on measurable results throughout company hierarchies.
This reform initiative comes amid Ghana’s challenging economic environment, where the government faces pressure to maximize returns from state investments. Finance Minister Dr. Cassiel Ato Forson’s administration has prioritized public sector efficiency as part of broader fiscal consolidation efforts.
A $150 million loan agreement signed in May 2023 allocated $15 million specifically for strengthening SOE oversight and performance management, demonstrating international support for governance improvements in Ghana’s state enterprise sector.
Industry observers suggest the success of performance-based compensation will depend heavily on establishing clear metrics and transparent evaluation processes. The authority must develop robust frameworks that fairly measure executive performance while avoiding perverse incentives that prioritize short-term profits over sustainable growth.
The proposed reforms align with international best practices for state enterprise governance, where many countries have successfully implemented performance-linked compensation to improve public sector efficiency. Ghana’s approach reflects recognition that traditional bureaucratic management structures have proven inadequate for competitive business environments.
SIGA’s endorsement signals potential widespread changes across state enterprises that have historically operated with limited accountability mechanisms. The authority expects these reforms to foster organizational cultures where accountability becomes standard practice rather than exception.
Implementation will likely require legislative and regulatory changes to establish legal frameworks supporting performance-based compensation structures. The authority must also develop monitoring systems ensuring that new incentive structures produce intended efficiency improvements rather than cosmetic changes.
As Ghana seeks to optimize state enterprise contributions to economic development, the compensation reform represents a fundamental shift toward market-oriented governance principles while maintaining public ownership structures.
Source: newsghana.com.gh
