Complex network of salaries, bonuses, and severance payments in other sectors
A quarter of state-owned enterprises did not respond to our request for access to the contracts of their executive directors, including some of the largest and most important public companies. The lack of transparency is further compounded by the failure to provide contract annexes.
The contracts we were able to obtain reveal varying practices regarding the definition of salaries, bonuses, and severance payments. The range of different calculation mechanisms, contractual definitions, and amounts indicates a web of non-transparent compensation, the absence of established standards for calculation, and the complexity of these roles.
To date, there have been no initiatives from the Government or Parliament to address these issues systematically and to permanently define standards for determining the elements of contracts for executive directors of state-owned enterprises.
Who is hiding the contracts?
As part of the comprehensive monitoring of these enterprises through the development of the portal “Whose Are Our Public Enterprises?”, we tried to obtain the contracts of the directors of state-owned companies. Out of 54 state-owned enterprises, we received contracts from 42.
The state-owned companies that did not provide the contracts of their directors include:
– Coal Mine,
– Airports,
– 13. jul Plantaže,
– Budvanska rivijera,
– H.T.P. Miločer,
– Montecargo,
– Montenegrin Shipping,
– EPCG-Solar Construction,
– Montepranzo,
– Zeta Energy,
– PIO DOO,
– ADA Sports Centre.
Some of these companies, such as Airports, Coal Mine, Plantaže, Budvanska rivijera, Montepranzo – Bokaprodukt, Zeta Energy, H.T.P Miločer, PIO DOO, EPCG-Solar Construction, and ADA Sports Centre, have been withholding not only the directors’ contracts but also all documentation regarding their operations for years—without any response from their boards of directors or the Government as the founder and owner.
A particular issue in terms of transparency of management compensation is the unavailability of contract annexes. Once signed, directors’ contracts are often amended, and annexes typically redefine salaries, work coefficients, and severance packages. In some cases, while we have access to the original contract, the annex has not been provided, or there is no confirmation that the contract has not been changed. Out of the 42 submitted contracts, 12 have signed annexes to their employment contracts, which were provided. Morsko dobro, Montenegroturist AD, and Ski Resorts of Montenegro did not respond to our inquiry about the existence of annexes.
How much do directors of state-owned companies earn?
Analysing the contracts we obtained, various amounts, measurement units, formulas, and coefficients are observed regarding the base salary of executive directors, as well as a network of additional and variable compensations. This reflects non-transparent compensation for executive directors of state-owned enterprises, the lack of established standards for calculation, and the complexity of these roles.
In most cases, directors’ base salaries are tied to the average salaries of employees in those enterprises. Typically, this involves three average salaries (EPCG, CEDIS, Regional Water Supply, Broadcasting Centre, Marina Bar, Morsko dobro…), with exceptions like the directors of CETI and the Montenegrin Solidarity Housing Construction Fund, who receive 2.5 times the average net salary in the company, and Bar Shipping with 2.2 average net salaries. In some cases, the basis for calculation is determined differently, such as using the average salary from the previous year or month (EPCG). In certain companies, the average net salary at the state level is used to determine the executive director’s salary (Montenegroturist – equal to one salary, BELEN – three average salaries, Castello Montenegro – from 1.5 to two average salaries).
On the other hand, the salaries of directors in many companies are calculated based on job complexity coefficients. These values vary across different enterprises, and in some cases, their calculation is determined by a collective agreement, while for others, it is determined by the Government (such as in the case of RTCG). The coefficient values vary significantly— the director of Luka Bar is calculated using a coefficient of 24, the director of the Regional Diving Centre 22, the director of RTCG 20.75, ŽPCG 20, ŽICG 19, National Parks 16.43, COTEE 13.3, and the director of the University Sports and Cultural Centre 7.6.
In a smaller number of companies, the director’s salary is set at a nominal amount (EPCG-Željezara Nikšić €2000, PROCON €1890, Monteput €1800, Institute for Black Metallurgy, Science and Technology Park €1600, IPC Tehnopolis €1678, Innovation Fund and Sveti Stefan Hotels €1500).
Bonuses
There is no uniform practice regarding the determination, calculation, payment conditions, or approval of bonuses.
According to the employment contracts we had access to, the directors of the Investment Development Fund (IRF), Morsko dobro, RTCG, the Innovation Fund, and the Science and Technology Park are entitled to bonuses. The executive director of RTCG can receive a bonus of up to two average net salaries in that public company. The directors of the IRF and Morsko dobro are entitled to bonuses “in accordance with positive business results.” The director of the Innovation Fund is entitled to cash rewards, but the contract does not specify the amount or conditions. For the director of the Science and Technology Park to receive a bonus, Government approval is required, which is not the case for other companies.
Severance payments and post-contract rights
Rights to severance compensation after premature termination of contracts for executive directors are also defined differently, while a smaller number of companies’ management contracts do not address severance or termination rights at all.
The amounts and methods of calculating severance vary. In most cases, it involves the right to a payout of 12 months’ gross salary, with both average and net salaries used as the measurement units.
In the event of dismissal, the director of the Electricity Company (Elektroprivreda) has the right to be reassigned to another position and to receive the salary he earned as a director for 12 months, after which he is entitled to two-thirds of his monthly salary until the end of his originally defined mandate. Similarly, the directors of CEDIS and Sveti Stefan Hotels have the right to be reassigned to a position with a minimum salary of two-thirds of their monthly salary until the end of their originally agreed term. In these cases, the contract does not specify whether the right to receive this amount applies if the former director declines reassignment.
In the event of dismissal, the directors of HTP Ulcinjska rivijera and IPC Tehnopolis will receive all remaining net salaries until the expiration of the originally set term, while the director of the Environmental Protection Fund is entitled to “two-thirds of six months’ salary.”
The severance payment for the director of Castello Montenegro is 12 of her average salaries, while the directors of Railway Transport and Railway Vehicle Maintenance are entitled to three average net salaries at the company level. The director of CETI has a severance payment of six net salaries, and the director of RTCG six gross salaries.
The Government is up next
It is necessary for the Government to establish clear guidelines through a new Law on Salaries of Public Sector Employees, which will regulate the manner of signing and amending contracts with executive directors of state-owned enterprises, set salary limits, introduce a unified calculation method, create bonus models that align with company performance, and address the issue of determining appropriate severance amounts in the event of contract termination.
Current legal solutions are incomplete and only apply to loss-making companies, which often ignore them, leading us to report over 60 state and local public enterprises to the Budget Inspectorate last year.
The current complex network of responsibilities and compensation calculations allows too much discretionary power to both boards of directors and the Government in arbitrarily determining coefficient values for individual enterprises. Neither the Government nor Parliament members have yet demonstrated a genuine willingness to address systemic problems in the operation of state-owned enterprises.
Text was created within the project “Civil Society for Healthy, Effective, Sustainable, and Transparent Public Enterprises (BEST SOEs),” supported by the European Union, with co-financing from the Ministry of Public Administration. The content of the text is the sole responsibility of Institute Alternative and does not necessarily reflect the views of the European Union and/or the Ministry of Public Administration.
