Samruk-Kazyna Executive Bonuses and the Problem of Corporate Governance

Samruk-Kazyna and Executive Pay

Lately, everyone has been outraged by the bonuses paid to Samruk-Kazyna's top managers. The amount of KZT 31 million (or KZT 57 million), critics say, is too large and out of proportion to the results Samruk-Kazyna is delivering.

I will not argue whether such bonuses are justified, since there are many reasons, both objective and subjective, that bear on the question.

But I would like to offer a few thoughts on Samruk-Kazyna and on the situation as a whole.

The main problem with Samruk-Kazyna (SK) and its subsidiaries is that the subsidiaries are fairly independent, and their executives are, by and large, quite autonomous. SK is more of a technical body than a decision-making one. In other words, real corporate governance does not work within the SK system.

At the same time, it seems to me that, in order to demonstrate its importance, SK tries to make its subsidiaries' work as difficult as possible, and every decision requiring SK's approval goes through far too much bureaucratic red tape. All of this resembles the workings of a government agency more than those of a commercial organization.

That is how things look to me from the outside. To dispel such doubts, what is needed is precisely a more or less open dialogue between top managers and interested parties.

The second problem is that Samruk-Kazyna depends very heavily on the state and often carries out the decisions of its shareholder, which are frequently not aimed at maximizing the Fund's profit. To break this stereotype, the principles by which Samruk is managed need to be transformed.

From the layman's point of view, one could say that Samruk creates no value added, and, combined with the independence of its subsidiaries, that it is simply an extra cost the state bears to maintain such an apparatus. It would be good if SK's management showed clearly where exactly SK has created value added.

I am also struck by the statements about waiving bonuses. Giving up a bonus is not a sign of social responsibility; it is a sign that the executive does not work for the bonus. And if he does not work for the bonus, then either he lacks motivation to develop the company, or he is motivated by something else. So from a social standpoint, it is better not to make such statements, as they have the opposite effect.

I do not intend to judge anyone, but what is happening shows that there is simply no feedback. What is needed are good examples and explanations of what is being done and what results have been achieved by the Samruk team itself, rather than by its subsidiaries.

I am sure there is something to show, because quite a large number of capable people work at Samruk.

Therefore, now, in this time of crisis, it would be good to accept Galym Baituk's challenge and try to hold a debate on whether Samruk is needed.

For example, one could show how decisions are made, which business processes have been introduced in the holding, what they have delivered in practice, and so on.