Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
10. Corporate Governance
Short-term incentives and their application
Short-term incentives reward operations results and are normally paid to key
staff in a position to make a measurable impact on company performance. Indicators
can differ among positions, but results must be measurable, and have an
observable impact on daily operations. Typically, these short-term KPIs for a
railway organization could measure profit, turnover, growth, punctuality, safety,
market development or other outcomes. The individual incentives can vary from
10 to 40 percent of a staff member’s annual compensation.
10.5.4 Transparency of incentives
The compensation system must be clear and fair, and ensure equal treatment for
individuals and staff groups. Human resources are usually responsible to ensure
compensation system effectiveness and market validity, so that the enterprise is
not overpaying for employee skills and performance. The CEO must control and
oversee compensation systems, and the board must be involved in designing and
applying compensation and incentive systems for top managers.
Contracts between employees and the company are confidential so details of
management compensation are not normally communicated outside the company.
However, compensation and incentive packages for the CEO and board
members are public, and normally included in the annual report.
10.6 Corporate Culture
The board helps set enterprise tone and culture, through selecting the CEO and
top management, developing corporate vision and mission statements, and establishing
strategies and spending programs.
When the railway requires significant changes in structure, performance, organization,
and public image—for example, after corporatization or restructuring—
the board role is even more crucial and challenging. During transition, many
company managers may resist the changes desired by shareholders and the
board, so the board and CEO must unite around a common set of assumptions
and desired outcomes. The board can hire management consultants to help develop
a strategy and implementation plan, evaluate existing management team
members, and help develop skills and attitudes required to implement the new
strategy.
Corporate culture is revealed by board member behavior and public statements.
Often, the board chair is the corporate public face and spokesperson; sometimes
the CEO plays this role. The board can recruit a corporate communications, public
relations, or image-consulting firm to advise them on designing and managing
internal and external communications strategies and plans.
The World Bank Page 168