Executive directors' contracts: poor performance rewarded

Abstract

PurposeTo help companies find ways of reducing costs when an executive director leaves an organisation because of poor performance or at the end of a contract.Design/methodology/approachThe author has conducted research in organizations that have executives on contracts for three to five years, identifies how executive directors are heavily rewarded when their contract ends voluntarily or involuntarily. Researches in organisations have shown that if you sign a contract as an executive director there is no incentive for excellent performance because most contracts of executives are designed in such a way that poor performance can be rewarded indirectly.FindingsVery few executives in Zimbabwe work through their contracts up to the end especially in parastatals due to what is perceived as poor performance but they are always met with a “golden handshake” as they call it though they have not contributed much except the demise of the organisation.Practical implicationsWays are provided for organisations to follow and try to mitigate the costs of paying executives when they leave organisations unceremoniously or when their contracts end without renewal.Originality/valueThis paper gives practical advice from situations in organizations and helps organisations to take into account the costs implications involved when an executive director leaves the organisation before the end of contract or poor performance.

Corporate board failure in Zimbabwe: Have non – executive directors gone to sleep?

“…Haspeslagh (2010) contends that the main instrument of corporate governance remains the role and responsibility of the corporate board which carries out the following three tasks: set direction and approve strategy, provide proper performance and risk oversight, selection, development and rewarding of leadership. In these tough economic times, investors are becoming more proactive as they cannot afford to leave the governance of their investments to unqualified directors or to special interest groups (Dandira, 2011). Boards are given more power to govern and control the performance of the CEO and the corporation (ibid).…”