Online Reporter
Dr Newton Demba
IN recent years, questions around executive compensation have moved from shareholder meetings to mainstream headlines — and rightly so.
As companies face economic headwinds, regulatory scrutiny and increasing demands for transparency, the issue of how much executives are paid — and why — has become a litmus test for corporate accountability.
What’s clear is this: executive compensation must reflect the true health of the business.
In too many instances, top executives continue to receive generous pay packages even when the companies they lead are underperforming or struggling.
This signals a worrying disconnect between reward and results; one that not only undermines public trust but also erodes the morale of employees and confidence of investors.
Misuse of benchmarking
At the centre of this problem lies the misuse of benchmarking.
In many companies, executive pay packages are justified through comparisons to “market standards”.
But these comparisons are often superficial. It’s not enough to say, “This is what other CEOs earn.” Benchmarking must be meaningful, not mechanical.
For benchmarks to hold value, they must be made against companies of comparable size, balance sheet strength, geographic reach and risk exposure.
Comparing the CEO of a mid-sized local business to one leading a multinational conglomerate is both misleading and dangerous.
When benchmarking lacks rigour, it becomes a tool for inflating compensation rather than ensuring fairness.
Boards must ask harder questions: Are we comparing apples with apples?
Are we assessing value creation relative to the real scale and health of the business?
Without this depth, benchmarking becomes a smokescreen, not a standard.
Culture of entitlement
The problem lies in a persistent culture of entitlement that has taken root in some boardrooms.
Bonuses are paid simply because they were expected. Perks are extended regardless of performance. And severance packages — often referred to as “golden parachutes”— are handed out even when executives leave under a cloud of failure.
This approach is not only unjustified; it’s harmful.
When executive compensation is treated as a guaranteed benefit rather than a reward for performance, it dilutes the sense of responsibility and weakens accountability at the top.
Contractualisation of benefits
Another growing concern is how some executives exploit weak human resources frameworks.
In certain organisations, everything from bonuses to 13th cheques is bundled into individual contracts, converting what was traditionally performance-based or discretionary into guaranteed income.
This contractualisation of benefits undermines the principles of meritocracy and performance.
When executives receive fixed annual incentives regardless of business performance — or when all perks are baked into employment contracts with little room for board oversight — governance suffers.
This practice turns leadership into a protected zone of privilege, not responsibility.
It also signals to employees that performance is negotiable for the powerful and non-negotiable for the rest — a perception that can quickly erode morale and culture.
Linking pay to performance
To fix this, businesses must adopt a performance-driven culture — one where compensation is tied to measurable outcomes, long-term success and ethical conduct.
Remuneration should not be based solely on financial metrics like revenue or profit growth, but also on non-financial indicators such as customer satisfaction, innovation, environmental sustainability and employee engagement.
Independent remuneration committees should assess executive pay using transparent scorecards, peer benchmarking and long-term performance targets.
Where necessary, companies should enforce clawback provisions, allowing them to recover bonuses if performance targets were achieved through unethical or unsustainable means.
Time for mindset shift
Beyond restructuring pay packages, there needs to be a shift in mindset.
Executive roles are not entitlements — they are positions of stewardship.
Those who occupy the C-suite must lead with the understanding that their compensation should mirror the company’s actual performance and value creation over time.
When a business thrives — expanding sustainably, strengthening its market position and fulfilling its obligations to shareholders, employees and communities — then generous rewards for leadership are justifiable.
But when it falters, executive compensation should also reflect that reality.
Building back trust
In an era where public and investor trust is fragile, boards must send a clear message: compensation must be earned, not assumed.
Aligning executive pay with business performance not only strengthens governance — it restores faith in corporate leadership.
If boards want to rebuild confidence and foster a healthy, high-performance culture, they must put an end to executive entitlement.
In its place, they should champion integrity, accountability and performance-driven leadership.
Dr Newton Demba is a corporate governance & 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.
