Is there a governance failure in corporatised Australian Government Business Enterprises? Evidence from their Chief Executive Officers’ compensation.

Publication Type:
Conference Proceeding
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Over the last three decades, governments have commercialised and corporatised many of their government business enterprises (GBEs) without privatising them under New Public Management (NPM) policy, which requires them to act as a corporate sector entity. These GBEs have independent boards that are responsible for the corporate governance of these entities, including the hiring of chief executive officers (CEOs) and determining their compensation. We examine the association between pay and performance for CEOs of GBEs and find that the levels and changes in CEO compensation are not associated with GBE performance despite being the explicit intent of NPM and regulatory policy. We suggest that this corporate governance failure could be due to the composition of the GBE boards. Our evidence shows that only 11.29% of directors appointed have public listed company experience with the balance of director appointments, being either senior public servants or political appointments who may lack the motivation or have any incentive to closely monitor CEO compensation. Accordingly, we suggest some possible policy changes to both the determination of CEO compensation and the composition of GBE boards.
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