Accountability frameworks and their relationship to the performance of state-owned companies
Date
2016
Authors
Murovhi, Hulisani Douglas
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Abstract
ABSTRACT
The quality of a country’s economic institutions is widely accepted as a key
determinant of cross-country differences in economic prosperity (Acemoglu, et al.,
2005). Owing to their responsibility to develop infrastructure and manufacturing
capacity, and to create employment, state-owned companies assume a critical role of
advancing and stimulating the economic growth of a country (Khoza & Mohamed,
2005).
In order to yield greater public economic value as agents of the national government,
state-owned companies need to operate within an accountability framework that is
adequate. Good governance is essential to ensure their positive contribution to the
overall competiveness and efficiency of the economy. The realisation of an adequate
accountability framework for state-owned companies is inhibited by a myriad of
factors.
This study attempts to explore the existing accountability framework applicable to
state-owned companies and the impact thereof on their performance. Through a
qualitative exploratory research study, the relationship between four (4) dimensions of
an accountability framework (transparency, performance objectives, supervision and
compliance, and performance) is examined.
The findings indicate: the prevalence of political patronage/influence in the
appointment of board members of state-owned companies; and that there are no
formal processes for the appointment of board members. Despite being ultimately
accountable for the performance of the organization, boards often do not have
absolute authority to appoint and dismiss the Chief Executive Officer (CEO) and other
executives. This in turn diminishes the level of independence and authority of the
board. Further, it was found that the oversight structures (in this case the line
department and the relevant Parliamentary portfolio committee) were not sufficiently
resourced and skilled to exercise an appropriate oversight function, nor do they have
the power to impose punitive measures of any form for non-performance. Furthermore,
conflict of interest situations exist within the supervisory structure matrix.
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Keywords
Corporate governance, Government accountability, Government corporations, Government business enterprises -- South Africa.