Online Reporter
Dr Newton Demba
In a previous article, I briefly raised the alarm on an emerging risk in executive compensation.
Today, I take a closer look because this quiet shift is not only far-reaching, but it is steadily eroding the foundations of good corporate governance.
Across boardrooms in Africa and beyond, a silent yet dangerous transformation is unfolding: the contractualisation of executive benefits.
Perks that were once performance-based such as bonuses, 13th cheques, fuel allowances and holiday packages are increasingly being hardwired into employment contracts as guaranteed entitlements.
At first glance, this may appear administrative or routine. But beneath the surface, it represents a fundamental breakdown in accountability, stripping boards of their critical ability to link executive pay to actual performance.
The rise of guaranteed perks
Historically, executive rewards were granted at the discretion of the board, aligned with company profitability, strategic outcomes and individual contribution.
Today, many of these rewards have become guaranteed regardless of performance, results, or value delivered.
Executives now expect to be paid more simply for holding office, not necessarily for delivering on strategic goals.
What was once earned is now owed, and the result is the slow, but steady corrosion of a performance-driven culture.
The danger becomes glaring in difficult financial years. While employees face retrenchment, bonuses are scrapped and operations are tightened, many executives still walk away with full benefits because their contracts say so.
Boards, in such cases, find themselves legally bound to reward mediocrity, even failure.
This is not only demoralising to staff, but also a betrayal of shareholders and stake-holders who expect accountability from leadership.
At the heart of this problem is the loss of discretion. Boards whose mandate includes enforcing performance discipline are increasingly powerless to act.
If a CEO underdelivers or a CFO presides over a weakening balance sheet, the board should be able to restructure or withhold bonuses.
But once those benefits are hardwired into employment contracts, the board’s hands are tied. Performance becomes irrelevant. Leadership becomes unaccountable.
The benchmarking illusion
To justify these terms, some boards cite benchmarking. But often, benchmarking is done lazily comparing benefit structures to those in large multinational corporations or economies with vastly different scales and complexities.
The result? Small or struggling companies offering first-world perks in third-world conditions. This not only distorts compensation logic, but also creates unsustainable financial pressure and damages credibility.
Culture at risk
Perhaps the most lasting damage is cultural. Guaranteed benefits create a trickle-down mindset of entitlement rather than excellence.
Conversations shift from “What did I achieve?” to “What am I owed?”
This culture erodes innovation, discourages ambition and breeds complacency — at a time when agility, performance and bold leadership are more critical than ever.
A governance breakdown
Behind the scenes, this crisis reflects a breakdown in HR governance and board oversight. Some boards approve executive contracts without a full understanding of their implications. Others fail to review clauses thoroughly.
In some cases, HR departments push for guaranteed benefits as a way to attract or retain talent, forgetting that true talent thrives in environments that reward contribution, not presence.
Newton Demba is a corporate governance and management consultant, non-executive director and adjunct lecturer at the University of Zimbabwe in the Faculty of Business Management Sciences and Economics. He writes in his personal capacity. For feedback, please contact: [email protected] or +263784166296.
Reclaiming the boardroom
This trend is not irreversible, but it demands decisive action. Boards must reclaim control of executive compensation and re-anchor rewards to results, not ranks. Key reforms should include:
Conducting independent audits of executive contracts
Embedding performance thresholds into all benefits
Tying incentives to company profitability and sustainability
Introducing sunset clauses for automatic perks
Strengthening HR and Remuneration Committee oversight
Final word: results must matter
The contractualisation of executive benefits is not merely an HR issue. It is a governance crisis. It reflects a shift away from accountability and towards entitlement and unless reversed, it will continue to erode trust, damage morale and undermine long-term performance.
Boards must rise to the challenge, restore discretion and insist that reward follows results. Because in business, as in leadership, you do not get paid just because you showed up. You get rewarded because you delivered.
Newton Demba is a Corporate Governance and Management Consultant, Non-Executive Director and Adjunct Lecturer at the University of Zimbabwe in the Faculty of Business Management Sciences and Economics. He writes in his personal capacity. For feedback, please contact: [email protected] or +263784166296.
