Accountability frameworks and their relationship to the performance of state-owned companies

Murovhi, Hulisani Douglas
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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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Corporate governance, Government accountability, Government corporations, Government business enterprises -- South Africa.