People forget that Telkom CEO Sipho Maseko left Vodacom in 2012 under rather strange circumstances. I won’t bore you with the details. But what he has achieved at Telkom since his appointment in April 2013 has surprised even his biggest cheerleaders.

He grabbed a tired, bloated, dying business by the scruff of the neck and got it into a position where it is competitive. That this is (technically) a state-owned company makes it an even more impressive feat.

Still, more than a few eyebrows have been raised at the revelation that he earned R25.9m in the 2017 financial year, with the entire 47-strong executive management team pocketing R200.8m. Comments on social media and elsewhere have rather predictably defaulted to negativity and suggestions of impropriety.

That R25.9m figure is misleading, however. It includes R9.6m in long-term incentives (in other words, vested shares), which is 37% of his total remuneration. These are from the company’s forfeitable share plan, additional shares award and performance share plans from 2013 and 2015. Short-term incentives total R8.8m (34%).

Maseko’s guaranteed total package is only 29% of his pay (R7.4m). This is by design. He — and group chief financial officer Deon Fredericks — are specifically incentivised on “long-term shareholder growth and sustainable profitability”. Performance areas are split across financial (40%), strategic milestones (25%), customer experience (20%) and people (15%).

400% return

Maseko is being (and ought to be) rewarded for turning Telkom around since his appointment. On the last trading day before he arrived, Telkom’s share price was R15. On 31 March 2017 (the end of the group’s 2017 financial year), it was R75.03. This is a 400% return in four years! The dividend has been restored and is growing. Again, people forget that the dividend was passed in 2012, 2013 and 2014, and was a paltry R1.45 in 2011. This has been achieved without asset sales. The new operating model, unveiled in June, will unlock further value.

But this is not a one-man show. Executives are being rewarded for driving this turnaround (as they should be). The average guaranteed pay increase for exco (and managers at all levels) was 0% in the 2017 financial year. For this, Telkom should be applauded. Compare Telkom’s executive pay to the salaries earned doled out to those in charge at other state-owned enterprises such as Transnet and Eskom and make up your own mind. A comparison to the private sector is especially flattering to Telkom. If Maseko were elsewhere, he would probably be earning more (some prescribed officers at MTN Group earn almost as much, for example).

It has scrapped the short-term incentive scheme for rank-and-file employees (and frozen salaries, with a 6% increase coming in the 2018 financial year) and introduced “a variable-based incentive scheme … known as Performance Pays. Performance Pays focuses on customer satisfaction and productivity metrics.” Telkom says these “incentives vary between 0% and 9% based on individual performance and are payable per quarter. In addition, employees who perform at or above a three performance rating each year, will each receive a “14th cheque”, payable in June 2017.

Shareholders are smiling. Staff should be smiling: there is renewed energy and purpose about the organisation (yes, there have been steep cuts to the workforce, but the business was overstaffed on every possible metric or global comparison). And government is smiling, too. Telkom is no longer a headache and in the past year has contributed R1.6bn to national treasury (R691m in taxes and R874m in dividends).

Moneyweb managing editor Ryk van Niekerk argued last month that Telkom is a lone beacon of hope. He’s right. Privatisation — even partial privatisation — of state-owned enterprises, however fanciful a dream this currently is, will ensure the market rates and rewards performance accurately (not with bogus and manipulable phantom share schemes).

It is worth dwelling on the fact that Telkom is not quite a state-owned enterprise. Technically, sure. But, it’s more of a quasi-SOE. It is majority-owned by the government (although this seems set to change as treasury runs out of options), but it is run for the benefit of all shareholders. In other words, it is run like a proper business!

Chairman Mabuza

Maseko and his exco aside, one cannot overstate the phenomenal job done by chairman Jabu Mabuza and the rest of the board of directors. Sure, government’s golden share expired in 2011, but Telkom has largely been left to its own devices. This almost certainly took some smart manoeuvering (Mabuza has been chair since November 2012) as many previous board members would attest (some have, privately). I would argue that Mabuza’s annual director’s fee of R1.3m is an even bigger bargain than Maseko’s salary.

For the first time in decades, Telkom is not only stable but growing and — importantly — it is shielded from political interference. The cynic in me will dwell on the fact that maybe the ruling party and the likes of the Guptas have far bigger troughs to go sniffing in.